■ 

|HBiit!H-!:i;i;i3l 

1 

!S!;iii'.i  i;!- 


Illliiiiiiiiii     ^iiiiiiii 

i  11  ||||B 


III  ii 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

GIFT  OF 


®»  V.C.  Li!--.. 


-ni 


this  is  the  property 
of 

Western  Advertising 


Return  to 

Ramsey  Oppenheim  Publications 

564  Market  Street 
San  Francisco,  Calif, 


Ramsey  OppEnhGlmCoJnc 

MAIL  AQVERTI51NG 

CrasslEu   Building 

ei9Mi5Si3Ki  gtreeT-119  Jessie  Street 

Ban  Franciisco 

Te^e^^one  Gutter  117:3 


THE 


Art   of  Collecting 

A  Statement  of  the  Underlying  Principles  and 

Practices  of  Collectings  with  Suggestions ^ 

Forms  of  Reports^  Letters,  etc,  etc. 


For  the  Collection  Manager  and  the  Business  Man 


By  R.  J.  CASSELL 

Collection  Manager,  Grinned  Brothers,  Detroit 


(Second  Printing) 


NEW  YORK 

THE  RONALD  PRESS  COMPANY 
1914 


Copyright,  1909,  by 
R.  J.  Cassell 


Copyright,  1913,  by 
The  Ronald  Press  Company 


I  >  ^ 


DEDICATED  TO 
MY  WIFE 
THE  INSPIRATION 
OF  MY  LIFE 


PREFACE 

When  we  consider  that  in  the  two  decades  between 
1880  and  1900  the  public  wealth  of  the  United  States 
increased  from  $42,000,000,000  to  $94,000,000,000 — 
or  more  than  doubled — we  must  admit  the  truth  of 
Emerson's  assertion  that  America  is  another  name  for 
Opportunity. 

It  is  a  known  fact  that  95%  of  the  business  of  the 
country  is  done  on  credit;  and,  as  credit  necessitates  col- 
lecting, the  importance  of  this  latter  subject  is  obvious, 
as  is  also  the  vast  field  open  to  the  man  with  a  specialized 
knowledge  of  the  collection  business. 

The  average  man  is  too  busy  with  the  selling  or 
producing  end  of  his  business  to  give  the  necessary 
time  and  thought  to  the  Collection  Department;  and 
inefficient  methods  are  common.  This  has  prompted  the 
author  to  prepare  the  present  book,  which  gives  not  mere 
theories,  but  actual  working  plans — plans  which  have 
achieved  success.  It  contains  the  results  of  his  experience 
during  many  years  of  practical  collecting,  and  gives  the 
facts  which  the  collection  manager  must  know,  whether 
he  be  acting  as  collection  manager  for  his  own  house  or 
in  the  collection  department  of  some  other  concern. 

In  the  larger  businesses  the  best  results  wiU  undoubt- 
edly be  obtained  by  the  employment  of  trained  experts. 
As  Edward  P.  Hatch,  president  of  Lord  &  Taylor, 
has  observed,  business  men  often  fail  because  they  under- 


PREFACE 

take  that  for  which  they  lack  the  necessary  capacity  or 
qualifications,  being  perhaps  not  fully  conscious  of  the 
deficiency.     He  says : 

"Success  comes  from  knowing  whether  you  yourself 
can  do  a  particular  thing  better  than  someone  else,  or 
vice  versa.  If  you  are  satisfied  that  you  cannot,  then 
hire  someone  else  to  do  it"  Nowhere  is  this  more  true 
than  in  the  collection  department. 

The  business  man  of  today  is  realizing  more  and  more, 
first,  the  absolute  necessity  of  collecting  the  money  for 
die  goods  which  he  has  sold,  or,  in  other  words,  the  folly 
of  selling  goods  for  which  he  is  not  paid,  and,  second, 
the  advantage  of  employing  an  expert  to  do  this  collecting. 
Thus  the  field  for  the  collection  expert  is  broadening 
every  day,  and  the  young  man  who  makes  this  his  career 
may  be  reasonably  sure  of  always  having  employment. 
In  bad  times  he  will  be  needed  to  get  in  every  possible 
cent  of  outstanding  accounts,  and  in  good  times  to  watch 
and  keep  within  bounds  the  ever-increasing  credits. 

But  the  would-be  collector  must  possess  a  clear  and 
practical  knowledge  of  the  collection  business.  The  manu- 
facture of  collection  experts  has  been  undertaken  in  some 
quarters  by  means  of  elaborate  courses  of  instruction; 
but,  while  the  author  has  no  wish  to  belittle  such  methods, 
he  is  no  great  believer  in  their  usefulness.  Such  courses 
cannot  take  the  place  of  actual  experience,  and  the 
necessary  information  can  perhaps  be  better  acquired  by 
careful  study  of  the  literature  available  on  the  subject  of 
collections. 

The  thanks  of  the  author  are  due  the  National  Asso- 
ciation of  Credit  Men  and  its  oflScers  for  courtesies 
extended,    and   particularly    for   permission    to    use    the 


PREFACE 

very  valuable  material  appearing  in  the  Appendix  of  the 
present  volume- 

The  author  also  desires  to  thank  the  editorial  stafi  of 
the  Ronald  Press  Company  for  very  efficient  assistance 
in  the  editing  and  arrangement  of  this  work.  Acknowl- 
edgments are  also  due  to  the  Bradstreet  Company  for 
assistance  in  connection  with  the  chapter  on  Mercantile 

Agencies. 

R.  J.  Cassell. 

Detroit,  Michigan,  August  6,  19 13. 


CONTENTS 

CHAPTER  PAGE 

I    The  Coixection  Manager  and  His  Work      ....      ii 

Credits  and  Collections — Close  Collecting — Conditional 
Sales — The  Collection  System — The  Collection  Manager — 
The  Collection  Manager's  Training — Conditions  of  the 
Collection  Manager's  Work. 


II    Credit  and  Collection  Information        .        .        ,        . 

Credits  and  Collections — Scope  of  Investigations — Sources 
of  Information — (i)  Reports  of  Commercial  Agencies — 
(2)  Statements  Furnished  by  Applicants  for  Credit — (3) 
Reports  of  Correspondents — (4)  Reports  of  Salesmen — 
(5)  Collectors'  Reports — (6)  Reports  from  Banks — (7) 
Information  from  Merchants'  Association — (8)  Miscel- 
laneous— Recording  Information. 


ni    A  Study  of  Debtors 4a 

Qassification  of  Debtors — (i)  Good  Pay — (2)  Slow  Pay — 
(3)  Bad  Pay — (4)  Execution  Proof — Compromises — 
Advantages  of  Qassifying  Debtors. 


IV    Collection  Systems 5a 

Planning  the  System — A  Working  System— Statement  of 
Accounts — Branch  Houses. 
vii 


viii  CONTENTS 

CHAPTER  PAGE 

V    C01J.ECT10N   System  for  Instalment  Business        .        .      62 

Contract  of  Conditional  Sale — Nature  of  Instalment  Busi- 
ness— The  Collection  Card — Handling  the  Accounts — Sug- 
gestions for  the  Instalment  Collector — Special  Require- 
ments of  Instalment  Collections. 

VI    Collecting  City  Accounts 70 

Location  of  Accounts — Monthly  Statements — The  First 
Statement — The  Second  Statement — The  Third  Statement 
— Nature  of  the  Follow-Up — Follow-Up  Letters — Opera- 
tion of  the  Follow-Up — The  Personal  Interview — Instal- 
ment Payments — Keeping  in  Touch  with  Delinquents. 

VII    Collecting  Oxttside  Accounts 80 

Nature  of  Outside  Accounts — Discounts  as  an  Aid  to  Col- 
lection— Prepayment  of  Accounts — Interest  on  Accounts — 
Collection  Procedure — Follow-Up  Letters — Drafts — A 
Second  Draft — Express  Collections — Free  Drafts — Sales- 
men as  Collectors — Collection  Attorneys  and  Agencies — 
Disputed  Claims — Variance  of  Records — "Fly-by-Night" 
Customers. 

VTII     Credit  and  Collection  Problems  of  the  Small  Dealer      96 

The  Small  Dealer — The  Extension  of  Credit — Securing 
Credit  Information — Opening  the  Account — Sales  and 
Collections — Collecting  Accounts. 

IX    Collection  Letters — General  Considerations       .        .     105 

Requirements — (i)  Clearness — (2)  Terseness — (3)  Force 
—  (4)  Courtesy — Style — Tone  of  Letter — Appearance  of 
Letter — Suggestions  for  Collection  Letters — Postal  Cards — 
Collecting  Letters. 

X    Collection  Letters  for  Petty  Accounts         .         .         .116 

Small  .\ccounts  Unavoidable — Close  Collections — Illustra- 
tive Letters:  (i)  Good  Customers — (2)  Insistent  Collec- 
tion—  (3)    Corporation   Accounts — (4)    Indorsement  Plan. 


CONTENTS  ix 

CHAPTEK  PAGE 

XI    Collection  Letters  for  Larger  Accounts        ,        .        .     129 

Handling  Larger  Accounts — Illustrative  Letters :  First 
Series — Second  Series — Third  Series. 

XII    Collection  Letters  for  Instalment  Accounts        .        .    140 

Handling  Instalment  Accounts — Conditions  of  Instalment 
Collections — Instalment  Notices — Instalment  Collection 
Letters — Non-Forfeitable  Contracts. 

XIII  Collection  Letters  for  Professional  Accounts        .        .    153 

Professional  Credits — Physicians'  Accounts — Lawyers'  Ac- 
counts. 

XIV  Collection   Letters  :    Miscellaneous       ....    166 

Reports  on  Deposited  Drafts — Letters  to  Collection 
Agencies — Letters  to  Collection  Attorneys — Direct  Re- 
mittances— Keeping  in  Touch  with  Collections — Defective 
Remittances. 

XV    The   Collector   and   His   Work 176 

Personal  Collections — Qualifications  of  a  Collector — Ejn- 
ploying  Collectors — Training  Collectors — Honesty  of  Col- 
lectors— The  Work  of  the  Collector — Collector's  Daily 
Report. 

XVI    Legal  Phases  of  Collecting 187 

Collection  Law — Collecting  by  Legal  Proceedings — Ejn- 
ployment  of  Attorneys — Attorneys'  Fees — Selection  of  Col- 
lection Attorneys — Placing  the  Account  in  the  Attorney's 
Hands — Follow-Ups  for  Attorneys — Bringing  Suit — 
Statute  of  Limitations — Exemptions — Replevin — Garnish- 
ment :  Attachment — Judgment :  Execution — Supplementary 
Proceedings — Imprisonment  for  Debt — Suggestions  for 
the  Collection  Manager — Law  for  the  Collection  Manager 
— Suggestions  to  Delinquent  Debtors. 

XVII    Mercantile  and  Collection  Agencies        ....    203 

Mercantile  Agencies — Mercantile  Rating  Books — Special 
Reports — Trade  and  Local  Mercantile  Agencies — Collec- 
tion Agencies — Methods  of  Collection  Agencies. 


X  CONTENTS 

CHAPTEB  PAGE 

XVIII    Unusual  Collection  Methods         .         .         .         .         .212 

The  Telephone  Call — The  Registered  Letter — The  Tele- 
gram— Follow-Up  Drafts — Instalment  Collections — Offer 
of  Concession — Discounted  Notes — Credit  Threats — The 
Black  List — Sending  Out  the  Boss — Turning  Accounts 
into  Judgments — Writing  to  Friends — The  Awkward  Call 
— The  Sweating  Process — Combining  Accounts — Gar- 
nishment Proceedings — Supplementary  Proceedings. 

Appenmx         ..........    227 

Collections  and  How  to  Handle  Them  (Articles  1-4) — 
Filing  of  Collection  Items — Tht?  Credit  Man's  Standard  of 
Efficiency — Personal  Appeal  Letters. 


The  Art  of  Collecting 


CHAPTER  I 
The  Collection  Manager  and  His  Work 

Credits  and  Collections 

Specialization  has  been  forced  upon  the  business  man 
by  the  increasing  complexities  of  present-day  business 
problems.  To  do  business  on  a  large  scale — sometimes, 
indeed,  on  any  scale — credit  must  be  given.  As  a  matter 
of  fact,  95  per  cent  of  the  business  of  the  country  is  done 
on  credit;  and  for  this  reason  any  business  of  magnitude 
must  have  departments  for  credits  and  collections,  and  in 
both  these  departments  must  be  men  of  special  skill  in 
the  work. 

It  has  been  said  that  collections  should  be  made  in 
the  credit  department;  and,  in  fact,  the  two  departments 
of  credits  and  collections  are  so  closely  allied  that  it  is 
hardly  possible  to  separate  them.  It  has  also  been  said 
that  if  a  credit  man  could  be  found  who  was  infallible 
there  would  be  no  need  of  a  collection  department.  But 
the  perfect  credit  man  has  yet  to  be  discovered,  and  in  the 
average  business  collecting  is  a  dire  necessity.  No  matter 
how  careful  the  credit  department,  a  mistake  will  occa- 
sionally occur,  or  conditions  will  change  after  a  credit  is 

II 


I  a  THE  ART  OF  COLLECTING 

granted,  or  misrepresentations  will  secure  a  credit  tliat 
should  never  have  been  given,  and  in  any  such  case  careful 
collecting  is  necessary  to  save  the  account 

Close  Collecting 

The  importance  of  a  proper  system  of  collecting  can 
hardly  be  overestimated.  It  is  worse  than  useless  to  sell 
goods  unless  these  goods  are  paid  for.  The  credit  man 
can  do  much  to  insure  payment,  but  upon  the  collection 
department  falls  the  burden  of  seeing  that  payment  is 
actually  made. 

Generally  speaking,  collecting  should  be  close.  When 
money  is  due  it  should  be  paid.  Many  debtors  think 
that  if  they  pay  interest  on  their  accounts  the  concern 
with  which  they  are  doing  business  should  be  willing  to 
carry  them  indefinitely.  When,  however,  it  is  taken  into 
consideration  that  a  business  can  and  should  make  from 
lo  to  20  per  cent  or  more  on  the  cash  capital  employed,  it 
is  clear  that  6  per  cent  from  a  customer  is  not  an  adequate 
consideration  for  carrying  the  account.  Nor  does  the 
ordinary  mercantile  concern  desire  to  engage  in  the  busi- 
ness of  loaning  money.  The  debtor  should  go  to  the 
bank  if  he  wishes  such  accommodation. 

Among  the  many  advantages  of  close  collecting  is  the 
obvious  fact  that  the  money  is  better  employed  in  dis- 
counting bills,  which  means  to  many  concerns  a  yearly 
saving  of  thousands  of  dollars,  than  in  carrying  overdue 
accounts.  Buy  right,  discount  bills,  and  it  is  easy  to  sell 
at  a  profit.  But,  unless  the  merchant  has  unusually  ample 
capital,  it  is  impossible  for  him  to  discount  his  bills 
unless  his  accounts  are  closely  collected.  A  good  system 
of  collecting,   rightly  managed,  is  the  equivalent  of  in- 


THE  COLLECTION  MANAGER  13 

creased  capital,  and  it  is  the  lack  of  capital  which  causes 
no  less  than  32  per  cent  of  all  business  failures. 

Also,  close  collecting  helps  to  retain  good-will.  A 
man  who  sustains  large  losses  yearly  because  of  failure  to 
collect  must  charge  a  higher  price  for  his  goods  in  order 
to  show  a  profit.  The  wise  buyer  is  fully  aware  of  this 
fact,  and  has  much  more  confidence  in,  and  is  a  great  deal 
more  willing  to  do  business  with,  a  man  who  insists  on 
his  money  when  it  is  due.  Also  close  collecting  often 
increases  sales,  for  a  delinquent  debtor  hesitates  to  add 
to  a  past-due  account,  even  when  this  is  permitted,  and 
places  his  next  order  with  the  house  which  has  compelled 
him  to  keep  a  clean  slate.  To  be  sure,  collections,  and 
particularly  close  collections,  must  be  handled  with  tact 
and  judgment;  but  these  are  merely  the  ordinary  qualifi- 
cations of  a  successful  collection  manager.  If  the  accounts 
are  properly  handled,  the  "worth  while"  customers  will 
not  object  to  close  collections — in  fact,  as  soon  as  they 
understand  that  this  is  the  rule  and  the  custom  of  the 
concern,  they  will  cheerfully  fall  into  line,  and  will,  as 
a  mere  matter  of  course,  pay  when  payment  is  due. 

This  is  true  for  the  most  part,  but  some  men  will 
always  be  found  who  can  pay  if  they  must,  but  who  will 
not  pay  if  they  can  avoid  payment,  and,  if  they  must  pay, 
will  postpone  the  evil  day  to  the  uttermost.  For  this 
reason  "keeping  everlastingly  at  it"  is  necessary  to  success 
in  the  collection  department.  No  account  is  uncollectible 
until  the  debtor  has  passed  through  bankruptcy,  has  died 
without  leaving  assets,  has  left  the  country,  or  has  avoided 
payment  until  the  account  is  outlawed — and  even  then  the 
good  collection  manager  does  not  entirely  despair. 


14  THE  ART  OF  COLLECTING 

Conditional  Sales 

The  system  of  selling  on  conditional  sales  and 
chattel  mortgage  has  introduced  a  new  element  into  the 
collection  business.  The  credit  man  is  not  so  necessary 
here,  as  the  title  to  the  goods  does  not  pass  to  the 
purchaser  until  the  entire  amount  is  paid;  but  after  the 
conditional  sale  is  consummated,  a  man  of  judgment  and 
great  perseverance  is  needed,  to  follow  the  transaction 
until  payment  has  been  made  in  full.  Much  of  the  success 
of  the  instalment  business  depends  on  the  activity  and 
ability  of  the  collection  department.  It  is  here  that  the 
collection  manager  has  the  fullest  opportunity  for  the 
display  of  his  talents. 

The  Collection  System 

The  collection  system  installed  must  depend  somewhat 
on  the  nature  of  the  business.  Once  installed,  however, 
It  should  be  strictly  adhered  to — unless  defects  show  them- 
selves in  practice — and  be  carried  out  in  detail.  It  is  by 
the  use  of  system  that  the  thousands  of  accounts  of 
an  active  business  are  followed  and  brought  to  the  atten- 
tion of  the  collection  manager  at  the  proper  time  without 
thought  or  effort  on  his  part.  The  many  details  of  col- 
lection under  a  good  system  can  be  largely  handled  by 
assistants,  who  merely  follow  instructions,  the  chief  re- 
quirement being  accuracy  in  their  work. 

The  Collection  Manager 

The  collection  manager  may  be  an  independent  official ; 
he  is  frequently  one  and  the  same  as  the  credit  man;  often 
he  and  the  bookkeeper  are  one;  but  whoever  or  whatever 
he  may  be,  he  occupies  a  position  of  the  greatest  impor- 


THE  COLLECTION  MANAGER  15 

tartce.  He  is  expected  to  produce  definite  daily  results — 
results  in  hard,  cold  cash,  which  are  necessary  for  the 
welfare  of  the  business.  If  he  does  not  produce  these 
results  in  some  measure,  a  successor  will  very  promptly 
usurp  his  position,  or  his  concern  will  go  into  bankruptcy. 

For  the  highest  success  the  collection  manager  must 
be  a  man  of  experience  and  trained  ability.  Beyond  this, 
he  must  be  thoroughly  interested  in  his  work.  This  is 
a  prime  requisite,  without  which  there  can  be  no  lasting 
success. 

Another  essential  of  the  successful  collection  manager 
— and  of  the  credit  man  as  well — is  tlie  ability  to  judge 
of  human  nature.  This  is  a  qualification  which  can  be 
acquired.  If  the  power  were  perfectly  developed,  the 
science  of  collections  and  credits  would  be  an  exact  one. 
It  is  found  in  its  highest  efficiency  in  the  man  of  large 
experience,  whose  judgment,  based  on  natural  ability,  has 
been  broadened  and  matured  by  actual  service  in  the  field 
of  business.  In  granting  credit  too  much  reliance  must 
not,  however,  be  placed  on  unsupported  judgment  of 
human  nature.  Nor  must  appearances  be  given  too  much 
weight,  for  appearances  are  sometimes  very  deceptive, 
and  facts  and  figures — certified  by  a,  public  accountant 
where  the  matter  is  important — are  a  better  basis  for 
credit  than  fine  feathers  or  plausible  manners. 

Courtesy  is  another  most  important  qualification  of 
the  collection  manager — a  qualification  which  anyone  can 
acquire,  and  for  the  lack  of  which  there  is  no  excuse. 
This  does  not  mean  that  a  collector  must  accept  any 
excuse,  or  fail  to  press  his  claims  properly,  or  weaken  in 
any  way  in  his  fair  demand,  but  merely  that  courtesy  must 
control,  no  matter  how  particular  conditions  are  handled. 


1 6  THE  ART  OF  COLLECTING 

Sometimes  harshness,  threats,  and  an  overbearing  man- 
ner are  necessary;  but  these  tactics  are  always  dangerous 
unless  the  collector  is  absolutely  sure  of  his  ground.  To 
use  such  methods  arouses  the  antagonism  and  opposition 
of  the  delinquent,  and  may  drive  him  away,  when  other- 
wise a  settlement  or  satisfactory  understanding  might 
have  been  reached.  On  the  other  hand,  though  the  rule 
is  far  from  infallible,  many  a  debtor  has  been  shamed 
into  making  payment  simply  by  courtesy  and  gentlemanly 
treatment.  The  good  manager  is  courteous  but  firm.  He 
collects  closely  and  clean,  but  in  doing  so  makes  the 
debtor — now  a  debtor  no  longer — his  friend,  and  the 
friend  of  his  concern.  The  driving  away  of  customers 
by  improper  collection  methods  is  an  offense  quite  suffi- 
cient in  itself  to  classify  the  collection  manager  as  unfit 
for  his  position. 

The  capable  collection  manager  should  possess  sym- 
pathy and  imagination.  If  he  shows  an  interest  in  the 
troubles  of  the  debtor,  wins  his  confidence,  and  gets  him 
to  talking,  much  valuable  information  may  be  obtained 
which  may  lead  directly  to  the  payment  of  the  claim. 
Where  this  information  is  not  so  directly  available,  it 
is  frequently  true  that  the  collection  manager,  by  placing 
himself  in  the  debtor's  position,  and  utilizing  his  own 
experience  of  the  collection  business  and  his  knowledge 
of  the  many  methods  by  which  payments  are  made,  may 
be  able  to  suggest  a  way  in  which  the  debtor  can  meet 
his  obligation.  Sympathy  must  not,  of  course,  be  allowed 
to  degenerate  into  weakness,  nor  imagination  be  allowed 
to  warp  judgment,  but,  properly  employed,  both  these 
are  legitimate  and  valuable  aids  in  collecting. 

Two  of  the  most  important  virtues  for  the  collection 


THE  COLLECTION  MANAGER 


17 


manager  are  patience  and  persistence.  If  not  Inborn, 
these  must  be  cultivated,  for  without  them  there  can  be 
no  real  success  in  collecting.  The  delinquent  debtor  must 
be  persistently  followed,  but  with  patience  where  patience 
is  necessary.  Though  rather  difficult  for  the  average 
impulsive  American,  the  collection  manager  must  on  occa- 
sion be  willing  to  wait  quietly  for  developments.  Many 
an  account  has  been  lost  through  quick,  hot-headed  action. 
On  the  other  hand,  many  accounts  actually  charged  off 
to  profit  and  loss  have  been  turned  into  money  by  patience 
and  persistence  on  the  part  of  the  collection  manager. 

The  collection  manager  must  always  bear  In  mind  that 
financial  conditions  of  Individuals,  as  well  as  of  nations, 
change  with  the  passage  of  time,  and  that  the  debtor 
whose  bill  is  uncollectible  at  one  time  may  be  entirely  able 
to  pay  at  another  later  time.  When  this  time  comes,  if 
the  debtor  knows  that  the  collector  Is  still  after  him,  he 
will  usually  settle  voluntarily,  or.  If  the  account  is  not 
outlawed,  may  be  forced  to  settle  by  means  of  legal 
process.  Long-drawn-out  accounts  of  this  nature  may 
be  charged  to  Suspense  Account  or  can  be  written  off  the 
books  entirely  and  transferred  to  a  "Doubtful  Accounts 
Ledger"  If  It  Is  thought  best  that  they  should  not  appear 
as  an  asset  of  the  business.  To  charge  off  annually  a 
certain  percentage,  depending  on  the  line  of  business,  or 
to  establish  a  reserve  for  bad  debts,  is  a  safe  precaution. 

The  Collection  Manager's  Training 

So  much  for  the  more  important  qualifications  of  the 
collection  manager.  Now  as  to  the  training  necessary  for 
the  most  effective  work.  The  most  important  is  perhaps 
business  experience.    The  more  he  has  of  this,  the  better. 


1 8  THE   ART  OF  COLLFXTINCx 

No  really  capable  man  thinks  that  he  knows  it  all.  Foi^ 
the  collection  manager — as  with  every  other  business  man 
— it  is  "live  and  learn,"  and  he  never  gets  too  old  to  leam 
something  new  about  his  business.  This  experience  must, 
as  a  rule,  be  attained  in  subordinate  positions.  TTie  busi- 
ness man  has  no  time  to  train  his  collection  manager,  who 
must,  therefore,  come  to  his  work  equipped  and  capable, 
so  that  collections  can  be  kept  up  from  the  first. 

A  good  knowledge  of  bookkeeping  is  most  desirable. 
The  collection  manager  need  not  be  an  expert  accountant, 
but  he  will  find  a  good  working  knowledge  of  accounts 
invaluable.  The  collection  system  itself  will  require  the 
application  of  many  accounting  principles,  and  situations 
will  frequently  arise  where  it  is  advantageous  or  even 
necessary  for  the  collection  manager  to  have  a  suflScient 
understanding  of  accounts  to  draw  proper  deductions 
from  balance  sheets  and  statements.  At  times  he  can 
seek  the  co-operation  of  the  accounting  department  for 
solution  of  the  problems  which  confront  him,  but  he  can- 
not always  depend  upon  this,  and  should  have  at  least  a 
fair  knowledge  of  accounting  in  order  to  handle  his  work 
intelligently,  and,  when  he  must,  independently. 

The  ability  to  write  a  good  collection  letter  is  almost 
essential.  In  some  cases  collections  are  made  in  person 
and  the  collection  letter  does  not  enter  in  at  all;  but  in  the 
great  majority  of  cases  the  collection  manager  must  do 
a  large  part,  if  not  all,  of  his  collecting  by  mail;  and  then 
the  ability  to  write  a  good  collection  letter  cannot  be  over- 
estimated. In  fact,  it  then  becomes  the  collection  man- 
ager's most  necessary  qualification.  The  subject  of  col- 
lection letters  is  treated  in  detail  in  Chapters  Vll-xu  of 
the  present  volome. 


THE  COLLECTION  MANAGER  19 

The  collection  manager  should  have  a  good  working 
kjiowledge  of  office  system.  His  own  department  should 
be  carefully  systematized,  and  it  is  advantageous  for  him 
to  have  an  insight  into  the  general  office  system  of  the 
concern  he  is  with,  so  that  he  may  know  what  information 
is  available,  and,  when  he  wants  it,  know  how  to  get  this 
information  easily  and  quickly.  This  promotes  the  work 
of  the  collection  department  and  increases  its  efficiency. 

The  collection  manager  need  not  be  an  attorney,  but 
he  should  possess  a  good  practical  knowledge  of  com- 
mercial law.  He  must  know  the  laws  which  apply  to 
sales,  to  debts,  and  to  collections  in  the  states  in  which  he 
works.  He  must  know  what  his  legal  rights  are  and  how 
to  enforce  them  when  necessary.  He  must  know  just  how 
far  he  can  go  in  forcing  payment;  and  he  will  also  find 
his  legal  knowledge  of  much  assistance  in  the  adjustment 
of  claims.  Speaking  generally,  he  must  be  sufficiently 
familiar  with  the  law  to  keep  out  of  trouble,  to  know  when 
it  is  absolutely  necessary  to  employ  an  attorney,  and  to 
know  just  what  is  to  be  expected — as  to  expenses  and  as 
to  results — when  an  attorney  is  employed.  The  most  im- 
portant legal  remedies  are  pointed  out  in  Chapter  xvi 
of  the  present  volume,  "Legal  Phases  of  Collecting." 

Ability  in  adjusting  claims  is  at  times  an  important 
qualification  for  the  collection  manager.  Frequently  it  is 
a  question  of  salvage — how  much  can  be  secured  and 
what  procedure  will  produce  the  best  results.  The  most 
successful  collection  lawyers  of  today  advise  their  clients 
to  settle  out  of  court  whenever  reasonably  possible;  and 
the  advice  is  good  for  the  collection  manager.  A  settle- 
ment out  of  court  is  much  more  profitable  to  all  concerned ; 
and  the  good-will  of  the  debtor,  which  is  so  important 


20 


THE  ART  OF  COLLECTING 


for  future  business,  can  be  retained.  The  collection  man- 
ager who  is  able  to  settle  his  cases  on  a  reasonable  basis 
out  of  court  will  be  much  more  highly  esteemed  by  his 
house  than  he  who  has  m.any  lawsuits  on  his  hands. 

Conditions  of  the  Collection  Manager's  Work 

The  collection  manager  must  make  a  close  analysis  of 
the  particular  business  of  his  concern  and  of  the  conditions 
under  which  it  is  conducted.  While  collecting  is  much  the 
same  in  all  kinds  of  business,  there  are  frequently  peculiar 
conditions — either  in  the  business  or  among  the  people  to 
whom  sales  are  made — which  will  require  special  treat- 
ment. It  is  obvious  that  a  business  selling  on  the  instal- 
ment plan  with  numerous  small  payments,  requires  a 
method  of  collection  quite  different  from  that  of  a  business 
in  which  the  sales  are  large  and  the  terms  of  payment  to 
some  extent  in  the  discretion  of  the  purchaser. 

The  collection  manager  must  also  make  a  careful 
study  of  the  general  conditions  under  which  he  works — 
the  policy  of  the  house — the  scope  of  his  authority — his 
relations  with  the  credit  department  and  the  selling  force 
— any  special  credit  concessions  to  particular  customers 
or  on  particular  lines.  Also,  he  must  possess  almost  as 
thorough  a  knowledge  of  the  goods  handled  as  do  the 
salesmen  themselves,  so  that  he  may  understand  com- 
plaints, smooth  over  difficulties,  meet  objections,  and 
avoid  unnecessary  friction  arising  from  returns  of  goods 
and  delays  in  payment. 

When  the  collection  manager  has  done  all  this — when 
he  has  acquired  the  experience  and  the  general  and  special 
qualifications  discussed — when  he  understands  the  general 
requirements    of    collecting — when    he    has    a    thorough 


THE  COLLECTION  MANAGER  21 

knowledge  of  the  requirements  of  his  particular  business 
— he  may  still  find  his  work  difficult,  but  he  will  also  find 
it  important,  interesting  and  pleasant,  and  his  success  a 
matter  of  course. 


CHAPTER  II 

Credit  and  Collection  Information 

Credits  and  Collections 

As  already  stated,  there  is  no  dear  line  of  demarca- 
tion between  the  work  of  the  credit  man  and  that  of  the 
collection  manager.  Collections  should  begin  in  the  credit 
department;  and  the  experience  of  the  collection  manager 
in  the  collection  of  his  accounts  bears  very  directly 
on  the  granting  of  credits.  The  information  necessary 
for  the  credit  man  is  also  needed  by  the  collection  man- 
ager. Both  must  know  more  or  less  definitely  the  financial 
status  of  the  customer — the  credit  man  to  decide  the  credit 
to  be  granted;  the  collection  manager  to  decide  the  best 
method  of  handling  the  collection. 

Speaking  generally,  the  information  relating  to  cus- 
tomers must  be  as  detailed,  as  specific,  and  as  extensive  as 
it  can  reasonably  be  made.  It  will,  of  course,  vary  with 
the  individual.  Some  customers  are  so  well  known  and 
of  such  unquestioned  financial  stability  that  the  merest 
reference  to  a  rating  book  is  sufficient  to  justify  any 
ordinary  credit.  There  are  many  grades  of  credit 
applicants  below  this  for  whom  the  ordinary  report  and 
ordinary  investigation  will  suffice.  When,  however,  the 
credit  manager  reaches  the  doubtful  line,  it  is  time  to  use 
exceeding  care.  His  reports  should  be  complete,  his  in- 
formation absolute,  and  his  investigations  searching,  and 
of  sufficient  scope  to  cover  all  danger  points. 


CREDIT  AND  COLLECTION  INFORMATION     23 

It  may  be  noted  in  passing  that  credit  is  not  an  exact 
science — that  the  credit  manager  must  usually  take  some 
chances.  The  credit  man  who  refuses  all  credits  which  are 
not  unquestionably  and  obviously  safe  will  incur  no  losses 
for  his  house,  but  he  will  in  most  cases  seriously  curtail  its 
business  and  its  profits.  In  other  words,  he  wiU  cut  out 
a  large  volume  of  business,  the  profits  on  which  would 
more  than  justify  the  risks  involved.  But  while  the  credit 
man  should  be  willing  to  take  some  risks,  he  must  not 
gamble.     The  risks  he  does  take  must  be  intelligent  risks. 

In  addition  to  the  special  information  in  regard  to 
individual  customers,  the  credit  man  and  the  collection 
manager  should  keep  thoroughly  posted  as  to  current  mat- 
ters affecting  their  work.  If  there  is  a  failure,  a  death,  a 
fire,  a  flood,  a  disturbance  of  financial  condition,  or  any 
other  disaster  or  event  which  affects  their  customers,  they 
should  be  prompt  to  discover  the  fact,  and  be  as  prompt 
to  act  upon  the  information  thus  obtained.  In  short,  the 
credit  man  and  the  collection  manager  must  both  be  alert, 
mentally  quick,  and  continuously  "on  the  job." 

Scope  of  Investigations 

In  securing  credit  and  collection  information  the  three 
important  "C's"  of  the  credit  man — character,  capital 
and  capacity — should  never  be  lost  sight  of.  No  matter 
what  a  man's  capital,  he  is  not  worthy  of  credit  unless  he 
has  character;  nor  is  he  a  safe  credit  risk  unless  he  has 
capacity  as  well.  Character  is  perhaps  the  most  important 
of  the  three,  for  it  means  that  willingness  to  pay  his  debts 
without  which  no  man  is  a  safe  credit  risk,  no  matter 
what  his  capital  or  capacity.  All  three  are,  however, 
essential  for  the  safe  extension  of  credit  if  the  amounts 


24 


THE  ART   OF  COLLECTING 


are  large;  and  it  is  to  the  establishment  and  the  measure- 
ment of  these  three  requisites  that  credit  investigations 
are  mainly  directed. 

Sources  of  Information 

The  credit  or  collection  manager  will  naturally  avail 
himself  of  every  possible  means  of  securing  credit  infor- 
mation. Ordinarily  he  cannot  undertake  personal  inves- 
tigations, but  must  depend  upon  the  reports  of  others. 
The  ability  he  displays  in  doing  this  is  largely  a  test  of  his 
fitness  for  his  position. 

Important  investigations,  especially  when  they  are 
near  at  hand,  occasionally  justify  field  work  on  the  part 
of  the  manager.  He  should  not  go  in  person  unless  the 
matter  is  of  sufficient  importance,  and  of  such  a  nature  as 
clearly  to  call  for  his  personal  effort.  When,  however, 
the  need  arises,  he  must  not  hesitate  to  desert  his  desk  and 
become  inquirer,  investigator,  or  detective,  as  the  case 
demands. 

The  usual  sources  of  credit  and  collection  information 
are  as  follows : 

(i)  Reports  of  commercial  agencies. 

(2)  Statements  furnished  by  applicants  for  credit. 

(3)  Reports  of  correspondents, 

(4)  Reports  of  salesmen. 

(5)  Reports  of  collectors. 

(6)  Reports  from  banks. 

(7)  Information  from  merchants'  associations;  direct 

Interchange  of  ledger  experience. 

(8)  Miscellaneous. 


CREDIT  AND  COLLECTION  INFORMATION       25 

(1)  Reports  of  Commercial  Agencies 

The  commercial  agency  report  is  the  usual  source  of 
information  when  questions  of  credit  arise.  There  are  but 
two  national  commercial  agencies  from  which  such  reports 
are  obtained;  but  there  are  numerous  local  and  trade 
agencies  which  supply  reports  within  a  more  limited  ter- 
ritory, or  within  special  lines  of  trade.  The  commercial 
agencies  are  considered  at  length  in  Chapter  xvil. 

(2)  Statements  Furnished  by  Applicants  for  Credit 

The  statements  which  the  customer  himself  furnishes 
give  his  own  view  of  his  financial  condition.  Such  state- 
ments are  valuable,  but  must  not  be  relied  upon  too  fully, 
as  self-interest  may  lead  to  misrepresentation  or  partial 
information.  Even  when  offered  in  the  best  of  faith,  they 
usually  give  the  most  optimistic  view  possible  of  a  cus- 
tomer's financial  status;  and  therefore  must  be  regarded 
as  merely  a  basis  for  investigation.  The  statements  of  such 
a  report  are  to  be  substantiated,  if  they  are  capable  of 
substantiation,  or  to  be  discredited  if  they  are  false,  or  to 
be  brought  down  to  their  proper  proportions  if  they  are 
inflated.  It  is  frequently  desirable  to  have  these  data 
approved  by  a  certified  public  accountant,  and  then  ana- 
lyzed and  transferred  to  a  comparative  form,  in  order 
that  the  changes  in  the  various  items  over  a  period  of 
years  may  be  noted. 

The  credit  manager  will  usually  make  up  his  own 
form  of  statement  for  the  applicant  to  fill  out.  Some  of 
the  more  important  matters  to  be  covered  by  such  a  state- 
ment are  as  follows: 


26  THE  ART  OF  COLLECTING 

(i)    Members,  if  a  firm,  or  officers,  if  a  corporation. 

(2)  Amount  of  capital;   if  a  corporation,   amount  of 

common  stock  and  preferred  stock,  if  any,  and 
dividend  requirements,  if  any. 

(3)  Amount  of  annual  business. 

(4)  Assets. 

(5)  Liabilities  and  to  whom  owed. 

(6)  On  what  basis  is  stock  in  trade  valued? 

(7)  Amount  of  insurance  carried. 

(8)  Are  accounts  and  notes  receivable  correctly  valued? 

(9)  Are  the  members — if  a  firm — sureties  for  anyone? 

(10)  What  are  the  quick  assets? 

(11)  Are  purchases  conservative? 

(12)  Are  credits  conservative? 

(13)  What  other  businesses  are  the  members  of  the  firm, 

or  officers  of  the  corporation,  engaged  in? 

(14)  Have  wives  or  relatives  of  the  partners  or  officers 

any  secret  or  prior  liens? 

(15)  If   a   corporation,    are    any    amounts,    not   shown 

among  the  liabilities,  due  officers  or  directors? 

( 16)  Are  any  accounts  or  bills  due  to  or  from  subsidiary 

or  inter-company  business? 

(17)  What  depreciation  on  fixed  assets  is  arranged  for? 

(18)  What  mortgages  or  bonds  are  held  by  the  firm  or 

corporation,  and  what  property  is  pledged  as 
security? 
In  making  such  a  statement,  good-will  is  not  consid- 
ered save  under  exceptional  conditions;  and  the  same  rule 
applies  to  patents  and  other  assets  of  an  intangible  nature. 
It  may  be  of  interest  here  to  give  the  "short  form" 
statement  recommended  by  the  American  Bankers'  Asso- 
ciation when  applications  are  made  for  loans: 


CREDIT  AND  COLLECTION  INFORMATION       27 

SHORT    FORM    STATEMENT 


ASSETS 

LIABILITIES 

Cash 

Notes  Payable 
Accounts  Payable 
Deposits 
Bonded   Debt 
Mortgages 
Accrued  Liabilities 

TOTAL 
Capital 

Surplus — Profits 
Reserves 

TOTAL 

Accounts  receivable 

(net) 

Merchandise 

TOTAL 



— 

CONTINGENT  LIABILITIES.    On  bill*  receivable  discounted Other. 


CASH.     On  hand  and  in  bank,  $ Names  of  banks. 


BILLS  RECEIVABLE.    Any  overdue  or  doubtful? Any  from  officers, 

directors,  sub-companies,  or  similar  sources? 

ACCOUNTS  RECEIVABLE.    State  amount  doubtful,  not  from  customers  or  in 
any  way  not  realizable  within  immediate  future 

MERCHANDISE.    Finished Unfinished Raw Valued  at 

cost  or  market? Is  all  salable? 


LAND.    Describe  briefly Assessed  value Market  value. 

BUILDINGS.     Cost  $ Age Depreciation 


MACHINERY  AND  FIXTURES.    Cost  $ Depreciation Condition. 

OTHER  ASSETS. 


Are  any  of  assets  unavailable  for  paying  debts? Losses. 

INSURANCE    State  what  kind  and  amount 


NOTES  PAYABLE.    To  own  banks Through  brokers Otherwise. 


ACCOUNTS  PAYABLE.    Terms  of  purchase? Do  you  discou« 

and  anticipate? 

DEPOSITS.    Time  or  demand? From  whom? Interest 

BONDED  DEBT  AND  MORTGAGES.    Due? Rate On  what 

assets  a  lien? 


ACCRUED  LIABILITIES.     Itemize. 


CAPITAL.     Preferred  Authorized  $ Issued    $ Dividends. 

Common  Authorized  $ Issued  $ Dividends  $.. 


RESERVES.     Itemize. 


28  THE   ART  OF  COLLECTING 

SHORT     FORM     STATEMENT   (Continued) 
NET  SALES. 


Last    fiscal    year 

Cost  of  sales 

Gross   profit 

Interest,  taxes,  depreciation,  etc. 

Dividends   paid 

Surplus  for  year 


Have  the  books  been  audited  by  a  Certified  Public  Accountant? If  lo, 

give  name  of  firm  and  date  of  audit 


CORPORATE  NAME. 


By 

(State  officer's  title) 

Date  signed 

O flfice  address Nature  of  Business 

Location  of  plants  and  branch  offices 


The  searching  nature  of  this  statement  shows  the  care 
with  which  banks  scrutinize  apphcations  for  loans — which 
are,  in  fact,  nothing  more  than  apphcations  for  credit. 
The  general  procedure  and  the  care  to  be  exercised  are 
the  same,  whether  the  property  involved  be  cash  or  mer- 
chandise. True,  there  is  a  margin  of  profit  when  a  bill 
of  merchandise  is  sold  which  may  justify  a  greater  risk 
than  do  the  small  interest  returns  on  a  loan,  but  the  gen- 
eral conditions  are  the  same;  and  the  credit  man  should 
study  the  conditions  of  a  proposed  credit  as  carefully  as 
the  bank  does  the  conditions  of  a  proposed  loan. 

That  this  fact  is  recognized  by  the  prominent  credit 
men  of  the  country  is  shown  by  the  very  searching  forms 
of  statement  recommended  by  the  National  Association 
of  Credit  Men  which  are  given  on  the  following  pages. 
The  first  form  presented  is  that  to  be  employed  when  the 
applicant  for  credit  is  a  corporation;  the  next  is  a  portion 
of  the  form  used  for  firms,  showing  the  variations  occa- 
sioned by  the  different  forms  of  business  organization. 
Both  forms  are  prefaced  by  an  explanatory  statement  as 
follows : 


OtEDIT  AND  COLLECTION  INFORMATION       29 

PROPERTY    STATEMENT    BLANK. 


RECOMMENDED  AND   INDORSED   BY  THB 
NATIONAL  ASSOOATION  OF  CREDIT  MEN 

THE  RECIPROCAL  VALUE  OF  A  SIGNED  STATEMENT 

Good  credit  in  the  markets  of  the  world  enables  every  merchant  to 
add  to  his  ability  to  do  business.  It  gives  him  the  use  of  enlarged  capital, 
thus  enabling  him  to  carry  a  more  complete  stock,  increase  his  sales,  and 
magnify  his  profits. 

Large  assets  are  not  always  necessary  to  the  creation  of  credit;  what 
IS  most  desirable  is,  that  credit  be  in  relative  proportion  to  the  actual  assets, 
and  in  harmony  with  conditions  which  create  and  maintain  it.  A  mer- 
chant's capital  is  the  sum  of  his  net  available  resources,  plus  his  credit.  The 
giver  of  credit  is  a  contributor  of  capital,  and  becomes,  in  a  certain  sense, 
a  partner  of  the  debtor,  and,  as  such,  has  a  perfect  righ?  to  complete  infor- 
mation of  the  debtor's  condition  at  all  times. 

Credit  is  given  a  merchant  because-  of  tht  confidence  reposed  in  him 
Requesting  a  statement  when  credit  is  asked  is  not  a  reflection  on  one's 
character,  honesty,  or  business  ability,  but  is  done  to  secure  information  to 
enable  business  to  be  conducted  intelligendy. 

When  a  statement  is  made  it  should  be  absolutely  correct  To  make 
It  so  necessitates  the  taking  of  at  least  an  annual  inventory  and  the  keeping 
of  an  accurate  set  of  books.  Statement  giving,  therefore,  will  tend  to 
make  a  debtor  a  better  buyer,  because  more  familiar  with  his  stock,  more 
careful  in  giving  credit,  more  conservative  in  incurring  debt,  and  will  result 
vn  a  better  knowledge  of  his  business  generally. 

A  merchant  who  desires  to  serve  his  own  best  interests  should  recog- 
nize that  his  most  valuable  possession,  apart  from  his  actual  assets,  is  a 
sound,  substg.ntial  and  unquestioned  reputation  as  a  credit  risk,  and  tlia^ 
under  the  prevailing  conditions  and  demands  of  business,  the  most  effective, 
and  eminendy  the  best  way* to  prove  his  basis  for  credit,  is  to  be  willing  to 
submit  a  statement-of  his  financial  condition. 

NOTE:  The  above  estimate  of  the  value  of-a  statement  to  both  giver  and  receiver  Is  the 
embodiment  of  the  thooghts  and  experiences  of  scores  of  the  leading  cred  it  men  of  the  United 
States,  who  are  members  of  the  National  Association  of  Credit  Men,  and  who  tbnsdesir* 
pnbUcity  gvrtn  to  their  views  ia  order  that  there  may  be  the  largest  benefits  to  both  retailor 
aad  wholesaler. 


30 


THE  ART  OF  COLLECTING 


To  RICH,  MANN  ft  CO.,  New  York 

For  the  purpose  of  obtaining  credit  now  and  hereafter  for  goods  purchased,  we  her^ 
with  snbmit  to  you  the  following  statement  of  our  resources  and  liabilities,  and  will  fan* 
mediately  notify  you  of  any  material  chango  in  our  financial  condition. 

In  consideration  of  your  granting  credit  to  the  undersigned,  we  agree  that  in  case  of 
our  failure  or  insolvency,  or  in  case  we  shall  make  any  assignment  for  the  benefit  of  credit- 
ors, bill  of  sale,  mortgage,  or  other  transfer  of  our  property,  or  shall  have  our  stock  or 
plant  attached,  receiver  appjointed,  or  should  any  judgment  be  entered  against  ns,  then  411 
and  every  of  the  claims  which  you  have  against  us  shall  at  your  option  become  immediately 
due  and  payable,  even  though  the  term  of-cfedit  has  not  expired.  All  goods  hereafter 
purchased  from  you  shall  be  taken  to  be  purchased  subject  to  the  foregoing  conditioos  as 
a  part  of  the  terms  of  sale, ' 


Corporatioa    style. 
City , 


.County. 


-....State.. 


BUSINESS  ASSETS 

Value  of  Merchandiseon  hand  at  cost 

If  manufacturing,  raw  material,  $ .finished,  i 

unfinished,  $. 

Notes  and  accounts,  c^h  value. 

Cash  in  hand„..__ 

Cash  in  bank . 


Bills  or  accounts  receivable,  due  from  officers- 
Patents  and  patterns 

Fixtures  and  machinery 


Total  real  estate,  cash  value $.. 

Total  encumbrances  on  real  estate,  $..._ 

Total  Active  Business  Assets... 


Equity— 


BDSIUESS  LIABILITIES. 

Owe  for  mdse.,open  acct,, 

of  which  $ ispastdue 

Owe  for  notes  for  mdse — 

Owe  banks . 

Owe  for  bills  for  paper  sold 
Owe  others  for  bor'd  money 

O^e  taxes  and  rent 

Mtgs.  on  fixt's  and  mach'y 

Total  Business  Liabilities 
Total  net  worth  -, 


Dollars 

Cents    1 

■-- 

— 

- 

-- 

■~ 

._. 

— 

— 

— 

— 

-- 

I   I   I  I      TT 


Please  state  location  and  description  of  each  parcel  of  real  estate,  and  cash  valuation 
of,  and  encumbrances  on,  each- 


CREDIT  AND  COLLECTION  INFORMATION       31 


f  AccommodatfoB  fndorsemeilts.. 
Contingent  Liability^ 


(.Indorsed  bills  receivable  and  oatstanding.. 


OFFICERS., 


President  . 
Vlce-Prest . 
Secretary- 
Treasurer  i 


Kama  In  Poll 


directors:  , 


Address 


Authorized    capital 

How  paid  in:  Cash,  $.„ 


._    Subscribed. ~ 

Other  property 


Paid  in 

Description  of 


other  property,  and  how  valued.... 

~ " - In  whose  name  la  title  to  real  estat«  held  ^ 

- ~ Incorporated  in  what  State  and  under  what  j;eneral 

laws  or  special  act? Nature  of    business? 

Date  of  charter?..^.... ~~ Suita  pending,  and  of  what  nature? „ 

.« Are  any  merchandise  creditors  secured  in  any 

way? ........    Amount  of  annual  business „ Annual  expenses ..„__ 

'Annual  dividends. « When   wais  last  dividend  declared  ? -    Rata 

Insurance  carried  on   merchandise Fixtures  and  machinery , 

Real  estate...- — -     Regular  time  of  talcing  inventory— -  Keep 

bank    accounts   with - .,....« _.....„ ;..„..._ „ „,_- 

Keep-    following    books    of    account..., 


If  you  have  pledged  or  transferred  outstanding  accounts  or  property  remaining-  under 
your  control,  state  amount  thereof  and  amount  received,  or  to  bo  received,  on  account  of 
such  pledge  or  transfer _. * _ _ 


Buy  principally  from  following  firms  ! 


Nsms 

^s^j: 1- 

Address 

What  Une  ot 
baelness? 

The  above  statement,  both  printed  and  written,  has  been  carefully  read  by  the 
undersigned,  and.  is    a    full   and   correct   statement  of .  our   financial    condition  as  of 


Corporation  Signatuns 

By. 


Date .'. „ 

All  qnestions  must  be  answered,  insert  ciphers  in  absence  of  any  amount  When  tha 
words  "Yes."  "No"  or  "None"  will  correctly  answer  ^he  questions,  wnt»theia  in  their, 
proper  places. 


32 


THE  ART  OF  COLLECTING 


What  portion  ot  real  estate  described  Is  hoiBeste.-id? ___> 

Have  you  any  other  debts  than  herein  mentioi'tid? _._ 


Full  fflvcn  (ind  surna:aio  of  «ach  parraer 

Agel 

Married  ? 

I'ossit.le  llablMtv  of  each 

meraber  of  ftrm  as 
InooritT,  boii'JFr.iiin,  etc 

r-r                                                        w 

" 

What  kind  of  business  do  you  conduct? 

Insurance  on  stock. Oa  fixtures,  machinery,  horses  and  wagons 

On  real  estate , 

•  Amount  of  sales  last  year Amount  of  expenses 

last  year What  proportion  of  your  sales  is  o'n  credit  ? 

How  often  do  you  take  an  Inventory  of  stock  ? Date  of  last  Inven- 
tory  - ~ If  you  have  borrowed  money  in  the  business,  state 

what  amount  is  secured  and  in  what  way 

w - Are  any  merchandise  creditors 

secured  in  any  way? Have  you  any  judgments,  judgment  notes, 

chattel  mortgages,  or  other  liens  against  you,  recorded  or  unrecorded  ?     If  so,  describe 

_ _    Suits  pending  and  of  what  nature...-. »..-. „„._ 

_._ _ ii  you  have  pledged  or  transferred  outstanding  accounts  or  property 

remaining  under  ypur  control,  state  amount  thereof  and  amount  received,  or  to  be  received, 

on  account  of  such  pledge  or  transfer. 

_ Keep  bank  account  with , 

What  books  of  account  do  you  keep? a 


Buy  principally  from  following  firms ; 

Name 

Address 

What  line  of 
buelncEs? 

^ ^ 

The  above  statement,  both  printed  and  written,  has  been  cai-cfuMy 
read  by  the  undersigned,  and  is  a  full  and  correct  statement  of  wy  or  ovtt 

financial  condition  as  of. — — !91 

Firm  signature, ™.»_- 

By  whom  signed i— -a  member  of  the  firm 

Alt  questions  must  he  answered,  insert  ciphers  in  ab<?ence  of  any  amount.     When  the 


W'ords  ■■  Yes," 
pioper  places. 


■No"  or  "  None"  wiU  correctly  answer  the  questions,  write  them  in  thsir 


CREDIT  AND  COLLECTION  INFORMATION       33 

It  IS  not  probable  that  any  of  the  usual  forms  of 
statements  or  reports  will  exactly  meet  individual  require- 
ments. The  credit  man  will  in  most  cases  find  the  reports 
required  by  the  Credit  Men's  Association  and  by  the  com- 
mercial agencies  too  complete;  and,  in  fact,  he  would  find 
diflSculty  in  inducing  his  credit  applicants  to  submit  so 
searching  a  statement.  It  is,  however,  easy  to  select  the 
more  essential  features  from  the  various  reports  and 
combine  tliem  into  a  statement  that  .will  meet  particular 
requirements. 

(3)  Reports  of  Correspondents 

Reports  of  this  nature  are  useful  as  confirming  or 
refuting  the  statements  of  the  applicant  for  credit  and 
as  bringing  out  new  facts.  Correspondents'  reports  will 
come  from  various  sources.  If  the  house  has  agencies 
or  representatives  In  different  places,  these  will  naturally 
supply  credit  information.  As  they  are  "In  the  family," 
their  reports  will,  of  course,  be  reliable,  and  as  complete 
as  they  can  be  made. 

Where  the  concern  has  no  representatives,  it  Is  some- 
times desirable  to  arrange  with  local  attorneys  for  reports 
on  credit  applicants  from  their  respective  territories,  pay- 
ing a  stated  fee  for  such  reports,  or  perhaps  letting  the 
attorneys'  compensation  come  from  the  collections  and 
other  business  placed  In  their  hands.  It  is  obvious  that, 
as  the  attorney  Is  liable  to  be  called  upon  to  realize  upon 
any  bad  credits  made  on  the  strength  of  his  reports,  he  is 
In  a  somewhat  delicate  position  and  will  be  apt  to  use 
much  care  in  his  statements. 


34  THE  ART  OF  C0LUEX:TING 

(4)  Reports  of  Salesmen 

The  traveling  salesman  is  invaluable  as  a  credit  re- 
porter. He  usually  knows  the  applicant,  and,  in  a  general 
way,  knows  his  circumstances.  Also  he  can,  if  he  will, 
circulate  among  the  acquaintances  of  the  applicant  and 
in  this  way  get  at  least  an  approximate  statement  of  his 
property  and  his  condition,  and  a  very  accurate  knowledge 
of  his  general  reputation.  For  this  reason,  if  for  no  other, 
a  friendly  feeling  should  always  be  cultivated  between  the 
credit,  the  collection  and  the  sales  departments,  so  that 
when  information  is  required,  the  salesman  will  be  willing 
and  anxious  to  obtain  it 

It  will  be  found  convenient  to  have  special  cards  for 
salesmen's  reports.  These  the  salesman  carries  with  him, 
and  reports  on  each  sale  as  made.  A  very  good  form  of 
report  card  for  this  purpose  is  as  follows : 


CREDIT 
Name » 

REPORT 

Address 

Does  he  gamble? «.... 

Does  he  drink? 

What  is  his  competition?..... 

Has  he  a  good  location? 

Does  he  keep  a  full  stock?.... 
Of  whom  does  he  buy? 

Has  he  competent  help? 

Is  his  business  growing? 

Is  stock  well  displayed?...*.. 
Date 

Is   he   a   capable   business 
man? 

What   is    his    general    reputa- 
tion   for   honesty    and    reli- 
ability?  

Is  his  store  clean? 

Salesman *. 

The  proper  arrangement  of  such  a  card  is  important 
Only  essential  information  should  be  required,  and  the 
questions  intended  to  elicit  this  should  be  so  worded  and 


CREDIT  AND  COLLECTION  INFORJ^IATION       35 

so  disposed  upon  the  card  that  the  answers  may  be  en- 
tered readily.  If  a  card  is  troublesome  to  fill  out,  the 
salesman  postpones  it  to  a  more  convenient  time,  which 
rarely  comes,  or  fills  it  out  hastily  and  in  a  partial  and 
inaccurate  manner,  or  gets  disgusted  and  does  not  bother 
to  fill  it  out  at  all.  It  is  usually  easy  for  the  salesman  to 
get  all  the  information  shown  on  the  foregoing  form  of 
card,  and  it  is  also  easy  for  him  to  enter  it,  as  most  of  the 
questions  can  be  answered  by  "Yes"  or  "No." 

(5)  Collectors'  Reports 

The  reports  of  the  collection  manager's  own  collectors 
should  be  of  the  greatest  value.  These  collectors  are  the 
manager's  direct  representatives.  They  are  working  with 
him  and  under  him,  and,  as  soon  as  they  have  had  suffi- 
cient experience,  will  secure  exactly  the  Information  he 
requires.  A  special  form  of  report  for  their  use  will  be 
found  advisable.  This  wiU  vary  according  to  conditions. 
A  good  form  of  report  on  an  individual  Is  that  on  the 
following  page,  which  gives  an  excellent  basis  both  for 
extension  of  credit  and  collection  of  accounts.  Much  of 
this  information  will  be  within  the  collector's  own 
knowledge,  or  can  be  obtained  from  people  who  know 
the  debtor,  and  it  may  be  added  that  much  of  it  could  be 
obtained  In  no  other  way.  When  a  collector  can  be 
trained  to  do  detective  work  of  this  sort  with  intelligence, 
he  naturally  becomes  much  more  valuable  even  for  his 
ordinary  routine  duties;  and  this  result  is  all  the  more  de- 
sirable on  account  of  the  difficulty  usually  experienced  in 
obtaining  adequately  equipped  men  for  this  work. 


36  THE  ART   OF  COLLECTING 

SPECIAL   COLLECTION    REPORT 

Folio Date  of  last  payment. 

Name Arrearage 

Address Date  of  last  report.  . . 


When  did  vou  last  call? What  did  debtor  sav?. 


Any  real  estate? Give  location 

How   improved? Encumbrances 

Valuation Value  personal  property 

Has  he  any  other  obligations  than  ours? To  whom? 

What    for? Amount? 

How  much  money  in  bank? What  bank? 

Exact  occupation 

If  employed,  where? 

Salary weekly monthly Date  of  pay  day 

How  long  in  present  position? 

If  not  employed,  how  long  idle ? 

Prospects  of  securing  work? With  whom? 

How  many  in  family? VvHiat  is  total  income? 

What    is    purchaser's    reputation    as    to    honesty    and    payment    of 

debts? 

Has  he  any  way  of  securing  a  loan  and  paying  in  full? 

Can  he  get  a  property  owner  to  sign  a  guarantee? 

What  is  your  opinion  of  this  sale? 

Date Signature  of  reporter 

Any  mortgages  on  the  property  of  a  debtor  can  be 
discovered  by  looking  over  the  county  or  municipal 
records.  Much  information  of  this  nature  the  collection 
manager  can  secure  for  himself.  In  all  the  large  cities 
some  legal  publication  is  issued  daily  which  publishes  all 


CREDIT  AND  COLLECTION  INFORMATION 


37 


liens  placed  on  real  and  personal  property;  and  the  collec- 
tion manager  can  keep  In  touch  with  this  by  subscribing  for 
such  a  paper  in  every  district  in  which  important  customers 
owning  real  estate  reside.  This  will  give  him  prompt 
notice  of  any  encumbrances  placed  on  their  property — 
information  of  material  value. 

The  collection  manager,  or  one  of  his  collectors,  usu- 
ally maintains  a  personal  supervision  of  recorded  en- 
cumbrances in  the  home  city.  He  may  keep  informed  as 
to  what  is  done  in  other  cities,  as  Intimated,  by  means  of 
published  reports.  Frequently,  however,  and  necessarily 
for  the  smaller  and  more  remote  places,  he  depends  on 
correspondents — usually  local  attorneys — to  keep  him  in- 
formed as  to  any  Hens  filed  on  the  property  belonging  to 
his  customers. 

(6)  Reports  from  Banks 

The  reports  of  applicants  for  credit  obtained  from 
banks  are  frequently  meagre  and  unsatisfactory.  This  is 
so  because  banks  are  very  reluctant  to  make  any  state- 
ments in  regard  to  the  financial  status  of  others.  If  the 
prospective  credit  risk  Is  a  depositor  of  the  bank,  it  natu- 
rally does  not  wish  to  say  anything  which  might  injure 
him.  If  he  is  not  a  depositor,  the  bank  does  not,  as  a  rule, 
wish  to  take  the  responsibility  of  making  a  report  that 
might  possibly  involve  it  in  trouble  later. 

If  the  collection  manager,  or  his  house,  does  business 
with,  or  is  on  friendly  terms  with,  any  of  these  banks,  he 
may  be  able  to  get  Inside  information  of  material  value; 
but  otherwise  he  will,  as  a  rule,  get  but  little  from  the 
banks.  Bankers  in  the  smaller  towns,  however,  will  fre- 
quently give  valuable  information,  especially  in  regard  to 


38  THE  ART  OF  COLLECTING 

the  standing  of  farmers,  of  which  they  usually  have  an 
intimate  knowledge. 

(7)  Information  from  Merchants'  Association 

There  is  much  freemasonry  among  merchants  in  re- 
gard to  credit  information,  and  in  many  cases  this  free- 
masonry has  crystallized  in  the  form  of  local  merchants' 
associations,  organized  for  the  interchange  of  information 
in  regard  to  debtors.  These  associations  are  very  effective 
and  productive  of  much  good. 

When  a  merchants'  association  is  formally  organized, 
an  office  is  usually  rented,  a  secretary  with  competent 
assistants  is  employed,  and  the  merchants  composing  the 
association  send  in  reports  of  their  experiences  with 
different  customers,  and  especially  with  those  who  are  slow 
pay,  or  difficult,  or  bad  risks.  The  secretary  of  the  asso- 
ciation keeps  this  information  systematically  filed  for 
reference,  and  furnishes  it  as  desired  to  any  of  the  mem- 
bers. All  the  members  stand  ready  to  give  any  proper 
information  asked  for  on  any  customer.  In  this  way  the 
deadbeat  within  the  purview  of  such  an  association  finds 
it  practically  impossible  to  get  credit,  and  moves  away  to 
some  other  place  where  the  merchants  are  not  so  pro- 
gressive and  well  organized. 

Frequently,  after  a  merchants'  association  of  this  kind 
is  well  organized,  a  rating  book  is  issued,  classing  each 
person  as  good,  slow  or  bad.  The  merchant  may  rely  on 
this  book  if  the  requested  credit  is  small,  but  if  the  amount 
of  credit  asked  for  is  larger,  or  if  he  has  any  doubt,  he 
will  ask  for  a  special  report  from  the  secretary.  Mer- 
chants' associations  of  this  kind  arc  frequently  termed 
"credit  clearing  houses."     Of  late,  largely  owing  to  the 


CREDIT  AND  COLLECTION  INFORMATION       39 

influence  and  educative  work  of  the  National  Association 
of  Credit  Men,  merchants  and  banks  have  entered  into 
a  free  interchange  of  ledger  experience  on  a  reciprocal 
basis;  and  this  is  becoming  a  most  valuable  aid  to  the 
credit  and  collection  departments. 

(8)  Miscellaneous 

Another  important  method  of  getting  at  credit  and 
collection  information  is  through  customers,  who  will  usu- 
ally talk  very  freely  about  themselves,  their  neighbors  and 
acquaintances.  Such  information,  while  not  entirely  re- 
liable, is  apt  to  be  correct.  In  most  cases  it  is  helpful,  and 
should  be  made  a  part  of  the  records  in  some  permanent 
form. 

This  method  of  securing  information  is,  of  course, 
practicable  either  for  the  traveling  salesman  or  for  the 
collector  as  he  makes  his  rounds.  Both  salesmen  and 
collectors  can  also  secure  much  valuable  information  by 
mere  observation.  If  a  home  is  trim,  neat  and  in  good 
repair,  it  speaks  well  for  the  general  character  of  the 
family.  If  a  farm  is  well  kept,  the  machinery  properly 
taken  care  of,  and  the  buildings  in  a  good  state  of  repair, 
it  is  a  natural  and  usually  correct  inference  that  the  farmer 
is  thrifty  and  prosperous,  and  a  good  credit  risk. 

In  this  connection  it  may  be  stated  that  farmers  gen- 
erally make  the  best  of  customers,  and  that  it  is  almost 
always  easy  to  determine  their  financial  condition.  Also, 
while  farmers  are  commonly  slow  pay,  it  is  but  rarely 
that  a  good  farmer  is  bad  pay.  Many  farmers  are  able 
to  go  to  the  bank  and  cash  their  note  for  any  reasonable 
amount,   and  through  this,   by  a  little  management,   the 


40 


THE  ART   OF   COLLECTING 


"slow  pay"  feature,  which  is  somewhat  characteristic  of 
farm  accounts,  may  be  eliminated  entirely. 

Recording:  Information 

The  collection  manager  does  not  usually  need  the  same 
exhaustive  information  as  does  the  credit  man.  He  does, 
however,  at  all  times,  need  some  information  on  the  ac- 
counts in  his  hands,  and,  in  the  case  of  bad  accounts  and 
under  certain  circumstances,  he  needs  the  fullest  informa- 
tion possible.  He  should,  therefore,  know  how  to  secure 
this  information  w'hen  it  is  necessary,  and — equally  im- 
portant— know  how  to  record  it  so  that  it  is  conveniently 
accessible  at  all  times. 

The  collection  manager's  information  is  perhaps  best 
kept  on  cards,  and  die  following  form  will  be  found 
convenient: 


Folio: 


Name. . . 
Address. 


Wife's  name: 


Occupation: 

Wages: 

How  long  employed? 

Name  of  landlord: 

Amt.  of  credit: 
$ 

Property: 

References 


Rating:    Dun,  $. 


.Rradstreet,  $. 


Report  . . 
Remarks 


CREDIT  AND  COLLECTION  INFORMATION        41 

There  will  doubtless  be  other  facts  the  collection 
manager  desires  to  bring  in  on  his  cards;  and  the  form 
can  be  changed  to  meet  any  special  requirements.  The 
cards  when  filled  out  are  filed  alphabetically,  or,  if  the 
number  is  large,  under  a  geographical  arrangement; 
i.e.,  all  the  cards  for  a  certain  district  or  a  certain  city 
are  grouped  together.  For  Instance,  under  this  plan  all 
the  cards  for  the  city  of  Cincinnati  are  filed  under  "Cin- 
cinnati," and  come,  on  the  general  alphabetical  scheme, 
under  "C."  These  cards  under  Cincinnati  are  in  their 
turn  arranged  in  alphabetical  order.  Then,  if  the  collec- 
tion manager  wishes  information  in  regard  to  James 
Frohman  of  Cincinnati,  he  opens  his  card  file  at  the  "C's" 
and  turns  to  Cincinnati.  Under  Cincinnati  he  goes  to  the 
"F's"  and  finds  James  Frohman's  card. 

Any  special  reports  may  be  filed  by  themselves  in 
jackets  or  envelopes,  and  the  card  on  which  the  name  and 
general  statement  appear  may  refer  to  these  special  re- 
ports, so  that  a  glance  at  his  cards  tells  the  collection  man- 
ager whether  any  special  reports  have  been  made,  and, 
if  so,  where  tliese  reports  are  to  be  found. 


CHAPTER  III 
A  Study  of  Debtors 

Classification  of  Debtors 

Debtors  may  be  divided  into  four  classes,  each  re- 
quiring different  treatment.    These  classes  are  as  follows : 

(i)  Good  pay. 

(2)  Slow  pay. 

(3)  Bad  pay. 

(4)  Execution  proof. 

(1)  Good  Pay 

This  class  comprises  those  debtors  who  either  pay 
their  accounts  voluntarily  on  or  before  the  due  date,  or 
pay  when  their  attention  is  called  to  the  fact  that  the 
accounts  are  due,  or  within  a  reasonable  time  thereafter. 
Any  customer  is  considered  good  who  has  not  reached 
the  "past  due"  file,  even  though  he  may  not  pay  on  receipt 
of  the  first  statement  sent  him. 

Debtors  in  this  class  require  but  little  attention.  Their 
accounts  should,  however,  be  gone  over  regularly  to  see 
that  they  are  paid  when  due.  There  Is,  In  fact,  a  certain 
responsibility  resting  on  the  collection  manager  to  do  this, 
for  it  has  happened  many  times  that  a  good-pay  customer 
has  fallen  from  this  high  estate  through  pure  neglect; 
i.  e*,  his  account  has  been  allowed  to  run  so  long  that  it 
has    either    cumulated    beyond    the    debtor's    power    of 

42 


A  STUDY  OF  DEBTORS  43 

prompt  payment,  or  his  affairs  have  become  involved  so 
that  he  cannot  pay  the  amount,  or  he  finds  payment  so 
difficult  that  he  tries  to  postpone  it  indefinitely  or  to  evade 
it  entirely. 

(2)  Slow  Pay 

The  slow-pay  class  of  debtors  is  usually  large,  and 
its  membership  is  recruited  from  many  classes  and  call- 
ings. These  slow-pay  debtors  are  not  by  any  means 
"deadbeats."  As  a  rule  they  fully  intend  to  pay  their 
debts,  but  for  one  reason  or  another  payment  is  delayed 
and  they  are  thus  brought  into  the  "past  due"  file.  The 
failure  to  pay  may  be  due  simply  to  poor  management  on 
the  part  of  the  debtor,  or  it  may  be  due  to  seasonal  con- 
ditions, or  to  other  circumstances  over  which  he  has  no 
control,  or  in  some  cases  it  may  be  found  that  demands 
have  arisen  which  he  deems  more  important,  or  finds 
more  urgent,  than  the  postponed  account.  Sometimes  it 
is  just  simply  because  the  collection  manager  has  not 
properly  followed  up  the  debtor,  and  so  the  money  that 
should,  and  with  proper  attention  would,  have  gone  to 
paying  that  particular  account,  has  gone  elsewhere. 

If  slow-pay  debtors  have  been  previously  on  the  books, 
the  circumstances  of  their  former  payments  should  be 
studied.  It  will  usually  be  found  that  while  they  have 
apparently  no  regard  for  the  agreed  terms  of  payment, 
they  ultimately  settle  in  full,  perhaps  at  stated  times,  or 
perhaps  at  irregular  intervals,  depending  upon  the  con- 
dition of  their  affairs.  They  always  pay,  however,  even 
though  it  be  according  to  their  own  idea  of  promptness. 
Their  treatment  of  preceding  accounts  will  probably  indi- 


44  THE  ART  OF  COLLECTING 

cate  the  proper  method  of  handling  the  present  indebted- 
ness. 

Slow-pay  debtors  are  often  found  in  the  rural  trade, 
where  they  depend  on  the  crops  for  their  income  and  pay 
their  debts  when  they  realize  on  these  crops.  In  such  case 
it  may  be  necessary,  and  good  business  as  well,  to  carry 
the  debtor  over  several  months  until  he  gets  in  his  own 
returns,  when  the  account  will  be  settled  in  full.  Such 
debtors  may  perhaps  be  better  classified  as  ''deferred" 
rather  than  slow.  They  are  good  pay,  but  they  pay  on 
their  own  terms  rather  than  on  the  terms  of  the  concern 
with  which  they  deal.  Payment,  though  slow,  is  sure,  and 
with  recognition  of  the  conditions  and  proper  handling 
of  the  accounts,  such  trade  is  desirable  and  safe. 

Where  payment  fails  because  of  neglect  on  the  part 
of  the  collection  manager,  there  is  but  little  to  be  said. 
It  is  the  collection  manager's  business  to  work  for  and 
facilitate  in  every  possible  way  the  prompt  payment  of 
accounts,  and  if  he  does  not  do  this  he  is  not  qualified 
for  his  position.  If  the  debtor  does  not  pay  when  pay- 
ment is  due,  he  should — diplomatically  or  otherwise,  as 
the  conditions  may  indicate — be  asked  to  pay,  and  should 
be  followed  up  thereafter  till  he  does  pay,  or  until  it  is 
conclusively  demonstrated  that  he  cannot  be  made  to  pay. 

Others  found  in  the  slov/-pay  class  are  those  who  are 
honest,  and  whose  intentions  are  perfectly  good,  but  who, 
through  some  miscalculation,  or  unexpected  demand,  or 
through  misfortune,  or  other  cause,  are  unable  to  meet  the 
payments  as  they  mature.  Such  debtors  require  very  care- 
ful treatment.  The  conditions  should  be  carefully  studied. 
Unless  they  are  hopelessly  down  and  out,  payment  is 
reasonably  sure  if  the  account  is  properly  nursed.    In  any 


A  STUDY  OF  DEBTORS  45 

such  cases  small  payments  can  usually  be  provided  for, 
or  the  collector  himself  may  be  able  to  suggest  means 
whereby  the  debtor  may  meet  his  payments,  or  it  may  be 
wise  to  let  the  matter  rest  until  the  debtor  has  had  time 
to  pull  himself  together  and  get  on  his  feet. 

Where  poor  pay  is  simply  due  to  bad  management 
on  the  part  of  the  debtor,  the  account  is  one  that  requires 
close  attention.  Money  is  coming  in  and  is  going  out, 
and  the  debtor's  failure  to  pay  is  merely  a  failure  to 
make  ends  properly  connect.  In  such  case  the  collection 
manager  who  is  in  closest  touch  will  fare  best.  He 
should,  under  such  circumstances,  study  the  conditions, 
and  carefully  suggest  such  method  of  payment  as  may 
be  best  both  for  the  account  and  for  the  debtor.  Usu- 
ally, as  in  the  preceding  case,  small  payments  can  be 
provided  for;  or  it  may  be  possible  to  find  out  when  con- 
siderable amounts  of  money  are  coming  in  to  the  debtor, 
and,  by  careful  management,  to  secure  payment  of  the 
entire  account  at  that  time. 

It  is  not  uncommon  to  find  debtors  who,  while  per- 
fectly good,  defer  payment  as  a  matter  of  profit  as  long 
as  it  can  be  done  without  serious  injury  to  their  credit 
standing.  Apparently  they  reason  that  they  need  not  pay 
until  they  have  to,  and  that  the  longer  they  keep  the 
money  in  their  possession,  the  longer  they  have  the  use 
of  it.  Accordingly,  while  not  deferring  payment  so  long 
as  to  subject  themselves  to  suit  or  even  to  unpleasantly 
harassing  dunning,  they  do  wait  until  the  collection  man- 
ager's patience  is  sorely  tried.  Such  debtors  should  be 
brought  sharply  to  time  by  a  firm  and  courteous  letter. 
They  are  using  the  concern's  money  for  their  own  pur- 


46  THE  ART  OF  COLLECTING 

poses;  and  the  practice  is  not  honest  and  should  not 
be  permitted. 

(3)  Bad  Pay 

In  this  class  of  debtors  are  found  those  who  are  able 
to  pay,  but  who  will  not  pay  unless  and  until  payment 
is  forced.  Among  these  are  men  who  are  really  hard  up 
and  who  defer  all  payments  except  those  which  press 
hardest.  Among  these  are  also  the  "high  financiers,"  who 
are  good  for  the  amount,  and  who  pay  at  the  last  mo- 
ment, but  who  wait  until  this  last  moment  actually  comes, 
thereby  gaining  the  use  of  money  for  weeks  and  perhaps 
months  after  it  should  have  been  in  the  hands  of  the  con- 
cern they  owe.  Men  of  this  kind  differ  from  those  of 
somewhat  similar  tendency  discussed  under  the  slow-pay 
class,  in  being  entirely  reckless  of  their  credit  standing. 
In  fact,  they  have  no  credit  standing;  and  credit  should 
really  never  be  extended  to  them.  When  they  do  secure 
credit  it  is  a  reflection  on  the  astuteness  and  efficiency  of 
the  credit  department.  Their  trade  is  not  desirable  on 
any  terms  except  spot  cash. 

The  professional  deadbeat,  who  gets  credit  wherever 
he  can,  and  who  pays  only  when  he  must,  is  also  to  be 
included  in  the  bad-pay  class.  Men  of  this  stamp  never 
give  attention  to  the  demands  of  the  collection  manager, 
are  rarely  accessible  to  the  collector,  or,  if  they  are  dis- 
covered by  the  collector  or  by  any  accident  call  at  the 
store,  are  profuse  with  many  promises  which  are  as  easily 
broken  as  made.  Such  men  should  never  be  trusted  at 
all;  but,  if  through  some  accident  they  do  receive  credit, 
they  should  be  followed  constantly  and  relentlessly  with 
letters,  personal  interviews,  garnishee  notices,  threats  of 


A   STUDY  OF  DEBTORS  47 

prosecution,  and  anything  else  that  will  bring  pressure  to 
bear  upon  them.  The  only  hope  is  to  make  payment  the 
lesser  of  the  two  evils,  and  this  requires  strenuous  work 
on  the  part  of  the  collection  manager. 

In  such  cases — and  in  other  cases  where  non-payment 
is  carried  to  the  breaking-point  of  the  collection  mana- 
ger's patience,  but  where  suit  is  not  yet  deemed  advisable 
— a  form  letter  is  sometimes  used,  written  on  the  sta- 
tionery of  the  concern's  attorney.  This  is  either  signed 
by  the  attorney  himself  or — with  his  permission,  of  course 
— by  the  collection  manager  with  the  attorney's  name, 
and  calls  the  debtor's  attention  to  the  account  and  to  the 
necessity  of  settling  it  at  once  in  order  to  avoid  suit.  Such 
letters  are  at  times  effective,  but  should  not  be  used  too 
freely. 

The  same  thing  may  be  said  of  the  practice  of  using 
blanks  supplied  by  collection  agencies,  which  purport  to 
be  sent  by  them,  and  refer  the  debtor  back  to  the  concern 
for  settlement  under  pain  of  prosecution.  The  method 
is  good  on  occasion,  but  is  not  to  be  used  where  future 
business  is  desired,  or  where  the  debtor  is  responsive  to 
other  means. 

By  relentless  persecution  the  money  can  frequently 
be  secured  from  the  bad-pay  debtor.  Long  before  this 
point  is  reached,  however,  his  name  should  have  gone  on 
the  black  list  and  have  been  turned  over  to  the  credit 
department,  to  prevent  any  further  extension  of  credit, 
and  indeed  any  further  business  transactions,  except  of 
the  simplest  and  for  cash.  It  is  always  dangerous  to 
deal  with  a  crook. 


48  THE  ART   OF  COLLECTING 

(4)   Execution  Proof 

Debtors  of  this  class  have  no  disposition  to  pay  their 
debts,  and,  having  no  property,  cannot  be  forced  to  do 
so.  The  accounts  coming  under  this  head  comprise  the 
residuum  from  the  other  classes — the  accounts  which  the 
credit  department  have  so  far  utterly  failed  to  collect. 
They  are  entered  in  the  "Bad  Accounts  Ledger,"  This 
is  to  some  extent  a  record  of  the  failures  of  the  collection 
department,  but  it  is  also,  in  a  sense,  the  graveyard  of  the 
credit  department,  since  it  is  the  place  where  the  bad 
mistakes  of  the  credit  man  are  buried.  With  proper 
work  in  the  credit  department,  uncollectible  accounts 
should  be  rare,  and  in  some  lines  of  business  should  be 
practically  unknown. 

No  matter  how  bad  accounts  may  be,  they  are  not 
considered  absolutely  uncollectible  until,  as  already  stated, 
they  have  expired  by  limitation,  or  the  debtor  has  died 
without  leaving  any  property,  has  passed  through  bank- 
ruptcy, or  has  permanently  left  the  country.  Bad  accounts 
not  extinguished  in  one  of  these  ways,  but  still  apparently 
uncollectible,  are  written  off  to  the  Bad  Accounts  Ledger, 
where  they  are  kept,  and  looked  over  at  intervals.  Then, 
if  at  any  time  a  debtor's  conditions  change  so  that  his 
account  becomes  collectible,  proper  steps  can  be  taken  to 
secure  its  payment. 

Compromises 

In  all  his  dealings  the  collection  manager  must  bear 
in  mind  that  most  people  are  honest.  He  is  dealing  with 
men  who  have  feelings,  ambitions  and  aspirations  as 
well  as  he,  and  when  they  evince  a  desire  to  do  the  fair 
thing  he  must  meet  them  part  way  at  least.      Business 


A   STUDY  OF  DEBTORS  49 

cannot  be  conducted  entirely  on  Shylock  principles;  and 
to  treat  others  fairly  and  even  generously  is  not  only  good 
feeling,  but  good  business  as  well.  This  brings  us  to  the 
question  of  compromises. 

Should  a  debt  ever  be  compromised?  The  one  aim 
and  object  of  the  collection  manager's  work  is  to  get 
money  for  his  concern.  If  he  is  convinced  that  it  is  abso- 
lutely impossible  for  him  to  get  all  that  is  due,  it  is  his 
duty  to  get  as  much  as  he  can;  and  to  do  this  he  must  on 
occasion  compromise  an  account. 

Compromises  as  to  time  are  very  much  more  frequent 
than  compromises  as  to  amount.  The  ordinary  slow-pay 
customer  wants  time,  but,  if  he  is  given  this,  will  pay;  and 
he  is  usually  too  desirable  a  customer  to  drive  away  by 
harsh  collection  methods.  In  such  cases  it  is  better  to 
study  his  conditions  and — either  before  or  after  the  pur- 
chase— agree  with  him  on  terms  that  he  can  and  will  meet 

Time  compromises — but  rarely  amount  compromises 
— are  also  necessary  occasionally  with  good-pay  debtors 
who  are  temporarily  embarrassed,  or  who  get  into  finan- 
cial difficulties  through  circumstances  beyond  their  con- 
trol. In  such  cases  small  payments  extending  over  a  con- 
siderable period  of  time  offer  the  surest  and  best  method 
of  securing  the  money  due;  and  the  collection  manager 
should  have  no  hesitation  in  making  whatever  arrange- 
ments are  possible,  even  though  they  be  somewhat  out 
of  the  ordinary. 

Compromises  as  to  amount  are  purely  a  matter  of 
judgment  and  conditions.  If  the  debtor  cannot  pay  the 
full  amount  of  his  debt,  or  if  he  is  able,  but  will  not,  and 
cannot  be  forced  to  pay  the  full  amount,  the  collection 
manager  must  be  content  with  what  he  can  get    The  mat- 


50  THE  ART  OF  COLLECTING 

ter  then  becomes  one  of  judgment  as  to  the  debtor's  ability 
to  pay,  and  of  trading  to  get  him  to  pay  up  to  this  full 
ability.  With  the  honest  debtor,  i.  e.,  the  man  who  would 
pay  if  he  could,  there  is  seldom  any  trouble  in  getting  all 
from  him  that  he  can  pay.  With  the  tricky  class — the 
debtor  who  could  pay  if  he  would,  but  who  is  execution 
proof — the  whole  matter  is  one  of  "jockeying."  Unless 
there  Is  something  to  be  gained  by  the  debtor  in  settling 
up  the  account,  such  cases  are  hopeless.  Sometimes,  how- 
ever, to  escape  the  persistent,  pestiferous  and  inopportune 
dunning  of  collectors  and  collection  letters,  or  for  the 
sake  of  effect,  or  for  the  sake  of  clearing  the  way  so  that 
he  may  obtain  credit  elsewhere,  the  debtor  of  this  class 
is  willing  to  pay  something.  It  is  the  duty  of  the  collec- 
tion manager  to  make  this  something  as  material  as  can 
be  forced  out  of  the  deadbeat  debtor  by  every  means  in 
his  control. 

Advantages  of  Classifying  Debtors 

The  successful  business  man  of  the  present  day  is  he 
who  carries  routine  in  the  various  branches  of  his  business 
to  the  "last  analysis,"  and  a  classification  of  debtors  such 
as  outlined  in  the  present  chapter  will  be  found  an  im- 
portant step  in  this  direction.  The  study  of  the  accounts 
receivable  necessary  in  order  to  make  a  proper  grouping 
gives  the  collection  manager  a  close  and  intelligent  knowl- 
edge of  his  accounts;  and  the  classification,  when  com- 
pleted, enables  him  to  handle  a  much  larger  number  than 
would  otherwise  be  possible.  This  Is  so  because,  while 
there  are  always  debtors  who  will  require  individual 
treatment,  the  larger  number  of  delinquent  accounts,  if 
carefully  and  intelligently  classified,  can  be  handled  ac- 


A   STUDY  OF  DEBTORS  51 

cording  to  a  fixed  routine  and  witli  form  letters,  so  that 
a  large  part  of  the  work  can  be  done  by  the  manager's 
assistants.  In  such  cases,  the  form  letters  employed  will, 
of  course,  be  individualized,  i.  e.,  typewritten  out  in  full 
with  the  parties'  names  and  addresses,  and  signed  with 
the  collection  manager's  name,  preferably  in  ink. 


CHAPTER  IV 

Collection  Systems 

The  efficiency  of  the  collection  department  depends 
largely  upon  the  adoption  and  intelligent  use  of  some 
simple,  practical  system  of  handling  its  routine.  The 
essential  feature  of  such  a  system  is  the  arrangement 
of  the  work  in  such  orderly  fashion  that  the  accounts 
will  be  automatically  brought  to  notice  at  the  proper 
time  for  attention,  and  a  record  be  kept  of  each  step 
of  the  collection  until  the  final  payment  is  made.  This 
is  accomplished  by  the  aid  of  suitable  filing  devices,  care- 
ful indexing,  and  the  application  of  an  efficient  follow-up 
system.  Much  care  should  be  given  to  the  planning  and 
installation  of  the  collection  system,  for  this  system  is 
the  mechanism  through  which  the  efforts  of  the  depart- 
ment are  exerted;  and,  if  it  is  well  devised,  it  makes 
possible  the  handling  of  thousands  of  accounts  where 
otherwise  only  hundreds  could  be  attended  to. 

Planning  the  System 

In  arranging  the  details  of  the  collection  system  the 
policy  of  the  house  must  be  taken  into  consideration. 
What  are  the  usual  terms?  How  closely  are  collections 
to  be  made?  What  leniency  shall  be  shown  to  delin- 
quents as  a  class?  These  are  not  matters  to  be  settled 
offhand  by  even  the  best  of  collection  managers,  but 
are  to  be  determined  by  the  heads  of  the  business,  who, 

52 


COLLECTION    SYSTEMS  53 

having  in  view  the  welfare  of  each  department  and  the 
best  interests  of  the  business  as  a  whole,  are  in  a  posi- 
tion to  decide  with  intelligence. 

If  there  is  a  credit  man,  he  and  the  collection  man- 
ager should  work  hand  in  hand,  and  the  organization 
of  the  collection  department  should  be  a  matter  of  con- 
sultation between  them.  If  the  credits  are  well  handled, 
and  there  is  the  proper  co-ordination  between  the  credit 
and  collection  departments,  so  that  the  information  se- 
cured by  the  credit  department  is  freely  accessible  to  the 
collection  manager,  the  work  of  the  latter  is  more  than 
half  done. 

When  the  organization  and  general  policy  of  the 
collection  department  is  once  established,  and  the  system 
under  which  it  operates  is  properly  worked  out,  the  col- 
lection manager  will  find  it  possible  to  turn  over  a  very 
large  proportion  of  the  detail  work,  such  as  posting 
reports,  filing  cards  and  papers,  watching  collections  in 
the  ordinary  course,  handling  routine  correspondence, 
etc.,  to  trained  assistants.  It  must  always  be  remem- 
bered, however,  that  these  very  details  are  much  more 
important  than  they  seem,  and  that  the  assistants  in 
whose  hands  they  are  placed  must  be  careful  and  ex- 
perienced. No  amount  of  good  judgment  and  clever- 
ness on  the  part  of  the  collection  manager  can  offset  an 
inefficient  and  carelessly  operated  system. 

It  may  be  noted  in  passing  that  a  system  once  worked 
out  should  not  be  condemned  too  hastily,  even  though 
it  does  not  at  first  come  up  to  expectations.  Give  it 
time  for  a  thorough  test.  Improvements  can  be  intro- 
duced as  defects  develop,  or  as  new  or  unexpected  con- 
ditions arise;  and  the  object  should  be   to  perfect  the 


54  THE  ART  OF  COLLECTING 

existing  system  rather  than  to  substitute  some  other 
system  in  its  place.  Not  only  are  changes  necessary  to 
remedy  defects,  but  they  must  be  made  to  keep  pace 
with  the  business  as  it  grows.  The  history  of  every 
really  successful  business  is  a  chronicle  of  constant  de- 
velopment and  of  equally  constant  adjustment  to  meet 
the  demands  of  growth  and  changing  conditions.  The 
collection  department  must  keep  pace  with  the  rest  of 
the  business. 

Without  an  adequate  system  collections  are  hap- 
hazard. They  are  not  attended  to  at  the  proper  time; 
they  are  not  handled  properly  when  they  are  attended 
to;  and  frequently  they  are  overlooked  entirely  for 
weeks  at  a  time.  The  natural  effect  of  such  a  lack  of 
system  is  to  invite  delinquency  in  payment,  to  make 
collections  more  difficult  and  more  uncertain,  and  to 
Increase  largely  the  percentage  of  loss  from  uncollected 
debts. 

It  is  impossible  and  unnecessary  to  present  the  many 
different  collection  systems  In  use.  All  arc  devised  to 
the  same  end,  and  differ  In  detail,  according  to  the 
nature  of  the  business  served,  rather  than  In  the  general 
plan.  Consequently,  a  system  In  effective  operation  in 
one  collection  department  would,  with  minor  modifica- 
tions, serve  as  a  system  for  any  other  collection  depart- 
ment. The  chief  requisites  are  that  the  system  be  simple, 
efficient,  and  as  Inexpensive  as  is  consistent  with  first- 
class  results. 

A  Working  System 

A  system  of  keeping  in  touch  with,  and  of  attend- 
ing to  the  accounts  of,  a  business  is  outlined  in  the  fol- 


COLLECTION   SYSTEMS  55 

lowing  pages.  This  system  has  proved  simple  and 
efficient  in  practice  and  can  be  adapted  in  detail  so  as 
to  conform  to  the  needs  of  almost  any  business. 

(i)  The  preliminary  work  for  the  collection  man- 
ager is  done  in  the  credit  department.  If  the  account 
is  an  important  one,  the  standing  of  the  purchaser  will 
have  been  fully  investigated,  and  much  information  that 
will  assist  the  collection  manager  in  case  collection  should 
prove  difficult,  is  secured  in  advance.  This  information 
is  supplied  at  the  time  the  first  invoice  reaches  him,  or 
else  is  at  his  service  when  needed.  With  smaller  accounts 
the  credit  department  does  not  insist  upon  such  particu- 
larity of  information,  and  frequently  will  take  chances 
that  everything  is  all  right.  As  a  result,  the  smaller  ac- 
counts are  frequently  the  most  troublesome  the  collection 
manager  has  to  handle. 

(2)  The  routine  of  collection  begins  with  the  sale. 
As  goods  are  sold,  the  invoices  are  made  out  in  duplicate 
or  triplicate,  the  original  going  to  the  customer,  and  the 
duplicate  copies  being  disposed  of  according  to  the  general 
system  of  handling  sales.  One  duplicate,  however,  always 
reaches  the  collection  manager,  usually  by  way  of  the 
office,  where  it  is  entered  on  the  books  in  the  regular 
way  and  its  folio  number  placed  on  it  for  convenient 
reference  later  when  checking  up  the  account.  The  form 
of  the  invoice  is  immaterial  to  the  collection  manager, 
provided  only  that  it  gives  the  name,  address,  date, 
amount  and  terms.  For  him  it  is  merely  a  memorandum 
of  the  transaction. 

(3)  From  the  office  the  duplicate  invoice  goes  to  the 
collection  manager  and  is  placed  in  an  invoice  file  contain- 
ing thirty-one  divisions  suitable  for  holding  invoices,  these 


56  THE  ART  OF  COLLECTING 

divisions  being  numbered  to  represent  the  days  of  the 
month.  These  invoice  files  play  an  important  part  in  the 
collection  system.  If  60  days'  credit  is  given,  two  of  them 
are  necessary.  If  90  days'  credit  is  given,  a  third  is 
required.  More  will  be  found  useful  if  still  longer 
datings  are  common. 

The  invoice  file  is  found  in  various  forms.  At  times 
it  is  merely  a  cabinet  with  thirty-one  drawers  in  it,  these 
drawers  being  numbered  to  correspond  with  the  days  of 
the  month.  Another  form  is  somewhat  similar  to  that 
of  the  ordinary  card  file,  but  large  enough  to  accommo- 
date the  invoices  behind  thirty-one  guide  cards,  which 
bear  numbers  corresponding  to  those  of  the  days  of  the 
month.  This  form  has  the  advantage  of  accommodating 
a  large  number  of  invoices  in  very  small  space.  Another 
form  sometimes  employed  is  practically  the  same  as  that 
of  the  vertical  letter  file,  this,  however,  being  of  smaller 
size  and  the  invoices  being  contained  in  jackets  with 
numbered  tabs.  A  very  simple  impromptu  file  for  a  small 
business  may  be  readily  made  by  means  of  large  manila 
envelopes  numbered  to  correspond  to  the  days  of  the 
month,  and  kept  in  numerical  order  in  a  desk  drawer. 

It  is  hardly  necessary  to  say  that  the  form  of  file  is 
of  but  little  moment.  Any  of  those  in  use  will  serve  the 
purpose  if  they  are  properly  kept  up  and  properly  at- 
tended to.  The  file  is  an  important  and  labor-saving 
device;  but  without  proper  attention  its  value  is  lost. 

At  the  beginning  of  the  year,  file  i  contains  the  in- 
voices maturing  in  January,  each  under  its  proper  due 
date.  File  2  contains  the  invoices  which  fall  due  in  Feb- 
ruary, and  file  3,  if  a  third  is  used,  the  invoices  for  March. 
The  method  of  using  these  files  is  as  follows : 


COLLECTION    SYSTEMS  57 

A  bill  of  goods  is  sold — say  on  the  15th  of  January, 
and  on  30  days'  time.  In  this  case  the  goods  should  be 
paid  for  on  the  14th  or  15th  of  February,  according  to 
the  custom  of  the  house.  The  invoice  is  therefore  placed 
in  the  February  file  under  the  proper  date,  and  requires 
no  more  attention  until  that  date  is  reached.  If  the  in- 
voice calls  for  60  days'  time,  it  is  placed  in  the  March  file 
under  the  proper  due  date.  If,  however,  the  invoice 
carries  90  days'  time,  it  is  placed  in  the  January  file  under 
the  14th  or  15th,  This  file  then  contains  both  January 
and  April  items.  There  is,  however,  no  conflict.  The 
90-day  item — due  in  April — comes  into  the  January  file, 
it  is  true;  but  it  takes  the  place  of  January  items  which 
have  already  been  taken  out  of  the  file  for  attention. 
There  is  therefore  no  mixing  of  items,  the  April  items 
closely  following  the  January  items  as  these  latter  are 
removed.  At  the  end  of  the  month  all  the  January  in- 
voices have  disappeared  from  the  January  file;  and  it  is 
then  devoted  entirely  to  April  business  and  becomes  the 
April  file.  In  like  manner  the  February  file  accommo- 
dates the  May  items,  and  the  March  file  the  June  items, 
and  in  this  way  the  files  are  used  continuously  without 
interference  between  the   incoming  and  outgoing  items. 

(4)  On  the  back  of  each  invoice  the  terms  of  sale 
are  stamped  and  the  due  date  of  the  invoice  is  entered. 
A  rubber  stamp  is  used  for  this  purpose,  the  due  date  and 
any  special  terms  of  sale  being  filled  in  with  pen  or  pencil. 
Each  day  the  file  automatically  indicates  the  invoices 
which  are  due  on  that  day.  These  invoices  are  then 
taken  out  and  compared  with  the  ledger  to  ascertain  the 
status  of  the  account;  and  if  they  are  not  already  paid, 
the  attention  of  the  debtor  is  called  to  the  fact  that  pay- 


58  THE  ART  OF  COLLECTING 

merit  is  due.  The  notice  sent  out  is  usually  a  simple  state- 
ment of  the  account,  stamped  perhaps  with  the  statement 
that  the  account  is  payable,  or  with  a  request  that  remit- 
tance be  made  by  return  mail.  In  case  of  city  collections 
the  invoice  memorandum  is  sometimes  placed  in  the  col- 
lector's hands  at  once,  for  personal  presentation. 

The  collection  manager  has  entire  charge  of  the 
accounts  after  the  invoice  is  placed  in  his  hands.  He 
supervises  the  sending  out  of  statements  and  directs  the 
treatment  of  the  accounts  thereafter,  all,  of  course,  being 
done  in  accordance  with  the  policy  and  understood  cus- 
toms of  the  house.  Where  monthly  statements  are  the 
rule,  these  usually  go  out  without  special  reference  to  the 
collection  manager,  as  it  is  purely  a  routine  of  collection 
and  does  not  require  his  O  K.  After  the  statement  goes 
out,  he  may  turn  over  certain  accounts  to  his  assistants, 
or  to  the  bookkeeper  or  cashier,  to  follow  out  a  pre- 
scribed routine,  which  then  goes  on  with  but  casual  super- 
vision on  his  part.  Even  these  accounts,  however,  if  any 
unexpected  turn  of  events  takes  place,  or  the  conditions 
are  such  as  to  require  special  attention,  are  at  once  taken 
over  by  the  collection  manager. 

It  should  be  needless  to  say  that  statements  or  notices 
to  debtors  should  be  sent  out  the  day  accounts  are  due. 
The  whole  collection  system  depends  for  its  effectiveness 
upon  prompt  action  at  the  proper  time,  and  if  notices  are 
not  sent  out  on  the  indicated  dates,  or  such  other  action 
taken  as  may  be  necessary,  the  system  is  thrown  "out  of 
joint";  a  bad  impression  is  produced  upon  the  debtor; 
and  the  whole  effect  is  demoralizing. 

(5)  When  the  notice  that  payment  is  due  has  been 
sent  out,  the  invoice  is  returned  to  the  invoice  file  five  days 


COLLECTION   SYSTEMS  59 

ahead  of  its  former  position,  or  even  further  if  the  debtor 
Hves  at  a  distance  or  if  the  system  calls  for  a  longer  time. 
The  date  of  the  invoice  will  usually  be  sufficient  to  dis- 
tinguish it  from  the  invoices  which  come  due  on  the  date 
to  which  the  unpaid  invoice  is  advanced.  If,  however, 
the  collection  manager  so  desires,  a  more  definite  indica- 
tion of  the  overdue  invoices  may  be  secured  by  means 
of  a  subdivision  of  the  compartment,  by  a  colored  sepa- 
rating sheet,  by  stamping  the  invoice  "Overdue,"  or  by 
pinning  to  it  a  colored  tag  plainly  printed  or  stamped 
"Overdue." 

If  at  the  end  of  the  five  days  the  account  is  still  un- 
paid, it  is  regarded  as  delinquent,  and  the  invoice  is  re- 
moved from  the  filing  cabinet  and  placed  in  an  ordinary 
vertical  file  under  alphabetical  arrangement.  A  letter  is 
then  written  to  the  debtor  calling  attention  to  the  fact 
that  his  account  is  overdue,  and  a  carbon  copy  of  this 
letter  is  attached  to  the  invoice. 

(6)  It  is  to  be  remembered  that  the  invoice  is  now 
no  longer  filed  by  date,  but  alphabetically,  together  with 
any  letters  or  other  material  relating  to  it.  Thus  the 
invoice  itself  no  longer  serves  as  an  automatic  reminder 
of  the  account  and  its  condition,  though  it  is  still  at  hand 
where  it  can  be  readily  referred  to  at  any  time.  To  sup- 
ply a  date  memorandum  of  the  account  that  will  auto- 
matically bring  it  to  attention,  a  card  is  made  out  and 
filed  in  another  vertical  filing  case,  sometimes  called  the 
"tickler,"  which,  like  the  larger  filing  cabinets,  is  divided 
Into  thirty-one  compartments,  each  representing  a  day  of 
the  month.  In  this  filing  case  the  collection  card  is  filed 
ahead  to  the  next  date  on  which  the  account  requires  at- 
tention,  the   time  varying  according  to   the   system.      It 


6o  THE   ART   OF  COLLECTING 

then  serves  as  a  reminder  and  a  concise  record  of  the 
account,  and  is  filed  ahead  from  time  to  time  until  the 
account  is  finally  paid.  When  this  consummation  is 
reached,  the  card  is  removed  from  the  tickler  and  de- 
stroyed, the  invoice  itself  is  taken  from  the  alphabetical 
file  and  placed  in  the  general  office  files,  and  the  transac- 
tion is  closed. 

A  form  commonly  used  for  the  collection  card  is  as 
follows : 


Folio Terms Dlip Date 

Name 

Address     

PROCEDURE 

RESPONSES 

The  handling  of  accounts  after  they  have  been  placed 
in  the  tickler  file  requires  the  use  of  statements,  notices, 
letters,  drafts,  forwarding  of  the  account  to  attorneys  or 
collection  agencies,  and  various  other  accessory  acts  and 
instruments  in  order  to  secure  final  settlement.  These 
very  important  matters  all  go  to  make  up  the  collection 
system,  and  will  be  found  treated  separately  in  their 
proper  places.  A  careful  record  should  be  kept  of  all 
that  is  done.  This  record  may  be  kept  on  the  collection 
card;  or  a  loose-leaf  ledger  will  be  found  convenient  and 
practical. 


COLLECTION   SYSTEMS  6i 

Statement  of  Accounts 

Under  the  system  outlined,  each  invoice  is  treated 
as  a  separate  transaction,  even  though  the  same  customer 
may  have  two  or  more  invoices  "in  process"  at  the  same 
time.  If,  however,  two  or  more  bills  of  goods  have  been 
purchased  during  the  month,  and  a  single  statement  cover- 
ing all  these  purchases  is  sent  out  on  the  first  of  the 
month  following — as  is  usually  the  case — no  material 
modification  of  the  system  is  necessary.  In  such  case  the 
individual  invoices  are  not  sent  to  the  collection  depart- 
ment; but  on  the  first  of  the  month  there  is  sent  to  the 
collection  manager  a  statement  of  the  customer's  account, 
covering  all  his  purchases  for  the  previous  month,  with 
perhaps  the  separate  invoices  attached;  and  this  state- 
ment is  handled  in  the  same  manner  as  the  individual  in- 
voice.    This  plan  obviously  saves  much  time  in  handling. 

A  combination  of  the  two  methods  is  easily  possible. 
Transient  customers  can  be  handled  under  the  separate 
invoice  method;  while  customers  who  usually  purchase 
more  than  one  bill  of  goods  in  a  month  can  be  handled 
under  the  statement  method. 

Branch  Houses 

If  a  house  operates  branches,  each  branch  will  employ 
the  same  system  as  the  head  office,  but  a  ledger  account 
for  each  customer  will  be  kept  at  the  head  office  as  well  as 
at  the  branch.  The  branch  house  should  send  in  weekly 
reports  of  its  sales,  and  also  of  its  collections,  which  are 
to  be  entered  in  the  ledgers  devoted  to  the  records  of  the 
branch.  It  is  then  the  duty  of  the  collection  manager  to 
see  that  the  branches  keep  their  collections  up  to  date. 
This  must,  of  course,  be  done  by  correspondence. 


CHAPTER  V 

Collection  System  for  Instalment  Business 

The  instalment  system  of  selling  goods  has  made 
rapid  strides  in  the  last  decade.  Not  many  years  ago  the 
plan  was  looked  upon  as  impracticable,  but  at  the  present 
time  instalment  houses  are  scattered  over  the  entire 
country,  and  sell  nearly  all  lines  of  merchandise.  The 
whole  system  is  merely  a  method  of  extending  credit  to 
the  customer  on  the  basis  of  a  stated  payment  each 
week,  month  or  quarter,  as  the  case  may  be. 

The  method  is  simple;  and  the  results,  when  the  in- 
stalment sales  are  properly  handled,  are  entirely  satis- 
factory. Payments  should  be  properly  secured  or  safe- 
guarded and  collections  should  be  close  and  clean.  The 
dealer  can  then  estimate  with  accuracy  just  what  he  will 
receive  each  month,  and  will  therefore  know  just  what  is 
available  for  the  purposes  of  the  business.  This,  of 
course,  presupposes  that  his  collections  are  properly  kept 
up,  and  payments  made  according  to  the  terms  specified 
in  the  lease  or  contract. 

Contract  of  Conditional  Sale 

The  usual  lease  or  contract  signed  by  a  purchaser 
under  the  instalment  or  conditional  sale  plan,  leaves  the 
title  in  the  vendor  until  the  full  purchase  price  is  paid. 
These  contracts  are  in  the  shape  of  a  promissory  note — 
regularly  drawn   and  bearing   interest — with   the   condi- 

62 


INSTALMENT   COLLECTIONS  63 

tions  annexed.  A  form  of  lease  much  used  by  instalment 
houses  is  given  below: 

$ iQi-- 

STAR  FURNITURE  HOUSE 

For  value  received,  I  promise  to  pay  to  the  order  of  Star  Furni 

ture  House,  2346  Wood  Avenue,  Chicago,  Illinois Dollars, 

as  follows : 

balance  in instalments  of Dollars  each, 

commencing 191 . .,  with  interest  at  6  per  cent, 

payable  annually.     Furniture  purchased 

, to  be  kept  at  my 

And  it  is  further  agreed  that  I  will  keep  the 

said  described  furniture  insured  for  benefit  of  the  Star  Furniture 
House,  as  their  interest  shall  appear,  and  that  said  furniture  shall  not 
be  removed  from  my  residence  without  their  written  consent;  that 
the  title  to  same  shall  remain  in  the  said  Star  Furniture  House  and 
subject  to  their  control  until  same  is  paid  for  in  full;  that  the  said 
Star  Furniture  House  shall  have  the  right  to  take  said  furniture,  if 
at  any  time  default  shall  be  made  in  the  payments,  or  they  shall  feel 
themselves  insecure,  and  the  amount  paid  shall  be  considered  liqui- 
dated damages,  and  will  be  thereby  forfeited. 

In  case  of  default  in  payment,  the  said  Star  Furniture  House  may 
at  its  option  take  such  property  as  afore  provided  or  enforce  the 
payment  of  this  note. 

In  case  any  of  the  above  described  articles  shall  prove  defective, 

the  Star  Furniture  House  shall  have  the  right  to  replace  the  same. 

Signed 

Nature  of  Instalment  Business 

So-called  sales  on  the  instalment  plan  are  not,  strictly 
speaking,  sales,  until  enough  has  been  paid  in  to  render 
it  reasonably  sure  that  the  purchaser  will  pay  out  on  his 
contract.  The  necessity  for  a  skilled  and  experienced  col- 
lector to  follow  up  payments  is  obvious.  The  responsi- 
bility of  doing  this  falls  properly  upon  the  collection 
manager;  and  all  of  his  skill,- judgment  and  tact  will  be 


64  THE  ART   OF  COLLECTING 

needed.  He  will  usually  have  the  fullest  opportunity  for 
the  exercise  of  his  abilities,  as  in  the  instalment  business 
the  collection  manager  reigns  supreme  in  his  department. 
To  carry  on  a  business  successfully  under  the  instal- 
ment plan  usually  requires  considerable  capital,  as  the 
investment  in  the  outstanding  goods  is  heavy.  To 
obviate  this,  the  contracts  themselves  are  sometimes  used 
as  collateral  security  for  loans.  Even  then  it  is  but  little 
less  imperative  to  collect  closely,  so  as  to  get  in  the  money 
as  it  falls  due.  Not  only  is  it  bad  business  to  borrow 
money  when  outstanding  payments  are  overdue,  and  not 
made  for  lack  of  proper  attention,  but  the  risk  of  letting 
accounts  run  is  serious.  Every  day  that  an  instalment 
payment  goes  over  its  due  date  renders  it  just  so  much 
more  difficult  to  collect. 

The  Collection  Card 

The  general  principles  involved  in  making  collections 
are  the  same  in  any  line  of  business,  instalment  or  other- 
wise. The  prudent  business  man  makes  himself  as  secure 
as  possible,  and  the  only  advantage  the  instalment  vendor 
has  is  the  greater  security  for  his  credits.  Against  this 
must  be  balanced  the  large  number  of  small  payments  in- 
volved, and  the  long  time  necessary  for  the  account  to  be 
paid  out.  Also,  the  character  of  the  trade  is  such  as  to 
call  for  the  closest  watching  and  the  promptest  and  most 
persistent  follow-up.  The  collection  system  described  in 
the  foregoing  pages  can  be  admirably  adapted  to  the 
instalment  business.  In  such  case  the  duplicate  invoice  is 
not  necessarily  turned  over  to  the  collection  manager,  but 
he  is  supplied  with  a  collection  card.  This  is  used  in 
several  forms,  but  whatever  the  form  it  should  always 


INSTALMENT   COLLECTIONS  65 

contain  the  information  appearing  on  the  illustrative  card 
which  follows : 


Folio 191. 

Name 

Address 

Purchases 


Terms 

Amount Interest. 

Salesman 

CREDITS 


Handling  the  Accounts 

The  general  system  described  in  the  preceding  chapter 
is  modified  for  the  instalment  business  as  follows: 

(i)  The  collection  manager's  card  is  filed  in  a  filing 
case  or  cabinet — similar  to  those  used  for  the  filing  of 
invoices — under  the  date  on  which  the  first  payment  falls 
due,  or,  if  the  notice  is  to  be  mailed  so  as  to  reach  the 
customer  at,  or  in  advance  of,  the  due  date,  the  card  is 
filed  under  the  proper  advance  date.  When  this  date 
arrives,  a  first  notice  is  sent,  and  the  card  is  filed  ahead 
six  days.     If  at  the  end  of  this  time  payment  has  not  been 


66  THE  ART   OF   COLLECTING 

made,  a  second  notice  Is  sent,  and  the  card  is  carried 
ahead  six  days  more.  If  the  payment  is  still  in  default 
at  the  expiration  of  this  time,  a  third  notice  is  mailed, 
and  the  card  is  either  filed  under  the  date  on  or  before 
which  an  answer  should  be  received,  or  Is  held  in  a  wait- 
ing file  until  sufficient  time  for  an  answer  has  elapsed. 

(2)  If  the  third  notice  does  not  bring  the  payment 
or  a  response  of  any  kind,  a  personal  letter  is  written  to 
the  delinquent,  and  his  card  is  filed  in  a  past-due  card  file 
or  cabinet.  This  is  of  the  same  construction  as  the  other 
file.  If  a  reply  to  the  personal  letter  Is  not  received  In 
a  stated  time,  a  collector  is  sent  to  Interview  the  debtor 
personally  and  find  out  exactly  why  payment  has  been 
delayed.  If  the  delinquent  is  out  of  town,  or  remote,  so 
that  a  personal  visit  is  impossible,  the  matter  is  one  for 
further  correspondence.  The  subject  of  notices,  letters, 
etc.,  for  the  instalment  business  will  be  found  treated  In 
detail  In  Chapter  xii,  "Collection  Letters  for  Instalment 
Accounts." 

Suggestions  for  the  Instalment  Collector 

It  Is  particularly  Important  that  the  first  payments  be 
collected  promptly  and  in  strict  accordance  with  the  con- 
tract. It  is  a  matter  of  experience  that  more  sales  are 
lost,  i.  e.,  goods  have  to  be  taken  back,  through  failures 
to  get  the  purchaser  started  right  on  his  payments,  than 
by  too  close  collecting. 

It  may  be  noted  that  when  an  instalment  sale  is  made. 
It  Is  well  for  the  salesman  to  impress  upon  the  buyer  that 
payments  must  be  made  at  the  place  of  business,  and  that 
collectors  are  sent  out  only  on  special  request.  If  the 
customers  are  properly  educated  from  the  start  they  will, 


INSTALMENT   COLLECTIONS  67 

in  most  cases,  make  their  payments  at  the  store,  thereby 
lightening  the  labor  of  the  collection  department  by  just 
that  much. 

If  it  is  found  necessary  to  extend  the  time  for  a  pay- 
ment, it  is  usually  wise  to  do  it  with  an  appearance  of 
extreme  reluctance,  so  that  the  customer  will  consider  it 
a  great  favor.  If  this  is  done,  he  will  not  be  nearly  so 
ready  to  ask  for  or  expect  further  extensions. 

Frequently  the  instalment  buyer  is  purchasing  goods 
from  several  houses  at  the  same  time  and  has  payments 
to  make  to  all  of  them.  In  such  cases,  if  the  burden  be- 
comes heavy  for  him,  it  is  "first  come,  first  served,"  the 
purchaser  paying  the  most  urgent  demands  and  "standing 
off"  the  house  that  is  lenient.  It  is  always  important  to 
impress  upon  the  customer  the  fact  that  the  goods  have 
been  sold  him  on  very  easy  terms  and  that  he  must  there- 
fore live  up  to  his  agreement,  but  when  he  evinces  a  dis- 
position to  favor  other  houses  there  should  be  a  strict 
insistence  on  payment  according  to  the  terms  of  the 
contract. 

The  instalment  buyer  usually  receives  his  wages  each 
week  or  month,  and  it  is  therefore  very  necessary  to  find 
out  just  when  his  pay-day  occurs,  so  that  a  letter  can  be 
written  or  a  collector  be  sent  to  see  him  at  that  time.  It 
must  also  be  borne  in  mind  that  the  instalment  customer 
seldom  has  resources  on  which  the  vendor  can  realize. 
Payment  must  be  made  out  of  his  weekly  or  monthly  earn- 
ings, and  it  is  extremely  difficult  for  him  to  make  back 
payments  if  he  is  allowed  to  get  in  arrears.  This  is  an 
additional  reason  why  collections  should  be  close;  but 
when  this  unhappy  condition  does  arise  it  is  sometimes 
possible  to  get  the  delinquent  to  increase  his  regular  pay- 


68  THE  ART  OF  COLLECTING 

ment  each  period  by  at  least  a  small  amount,  and  thus 
bring  his  account  up  to  date.  This  is  frequently  done  in- 
formally; but  it  will  at  times  be  found  more  effective  if 
the  customer  signs  a  special  agreement  to  make  larger 
monthly  payments,  this  agreement  stating  specifically  that 
it  does  not  change  the  conditions  of  the  original  contract. 
The  debtor  is  much  more  likely  to  live  up  to  a  written 
promise  of  the  kind  than  to  any  informal  arrangement  for 
such  increased  payments.  A  good  form  for  such  use  is 
as  follows : 

AGREEMENT 

I  hereby  agree  to  pay  the  Chicago  Furniture  House  five  dollars 
on  the  I2th  day  of  each  month  hereafter,  until  the  interest  on  all 
payments  now  due,  and  the  said  payments  now  due  on  a  certain 
dining-room  table,  purchased  by  me  from  said  house  under  a  con- 
tract of  sale  dated  March  i,  1913,  have  been  paid  in  full,  together 
with  all  regular  payments  accruing  under  said  contract  meanwhile, 
and,  provided  said  payments  are  made  as  herein  agreed,  the  Chicago 
Furniture  House  is  to  accept  same  and  to  apply  them  as  herein 
provided.  It  is  specially  understood  and  agreed  that  this  present 
undertaking  does  not  affect  the  conditions  of  the  original  contract  of 
March  i,  1913,  in  any  way. 

(Signed)        John  H.  McCullough. 
Urbana,  Illinois,  April  15,  1913. 

Special  Requirements  of  Instalment  Collections 

The  instalment  plan  appeals  with  special  force  to  the 
improvident,  and  there  is  no  doubt  that  the  instalment 
buyer  frequently  purchases  far  beyond  his  means.  It  is 
for  him  an  easy  means  of  discounting  the  future.  This 
is  one  of  the  bad  features  of  the  system.  An  article  that 
can  be  bought  for  eight  dollars  down  and  eight  dollars 
per  month  for  three  or  four  months,  appears  to  many 
purchasers  as  merely  an  outlay  of  eight  dollars;  and  they 


INSTALMENT   COLLECTIONS  69 

fail  to  consider  whether  they  will  be  able  to  make  this 
payment  month  after  month  as  it  falls  due. 

For  this  reason,  and  because  of  the  general  nature  of 
the  business,  instalment  accounts  must  be  followed  with 
tireless  energy.  This  is  the  great  secret  of  success  with 
the  instalment  business.  No  matter  how  regular  the  pay- 
ments, the  collection  manager  must  not  be  lulled  into  a 
condition  of  assurance  and  neglect.  No  delay,  be  it  even 
for  a  few  days,  must  pass  unnoticed.  A  debtor  may  be 
good  pay  for  several  months,  and  then,  through  loss  of 
interest  in  the  purchase,  or  loss  of  position,  or  through 
some  unexpected  call  upon  his  resources,  or  perhaps 
through  injudicious  purchases,  become  very  poor  pay. 

The  work  of  collecting  instalment  payments  is  an  un- 
satisfactory one  in  some  ways,  and  a  collector  always  will 
have  bad  accounts.  These  should,  however,  be  reduced  to 
a  minimum,  and  for  the  encouragement  of  the  instalment 
collector  it  may  be  said  that  a  man  who  thoroughly  under- 
stands and  is  successful  at  this  work  is  in  much  demand, 
and  under  any  ordinary  conditions  need  never  be  out  of 
profitable  employment 


CHAPTER  VI 

Collecting  City  Accounts 

Location  of  Accounts 

Accounts  may  be  roughly  divided  into  city  accounts 
and  out-of-town  or  outside  accounts.  City  accounts  as 
here  considered  are  those  located  in  the  same  city  or  town 
as  the  office  of  the  concern  to  which  the  accounts  are  due. 
The  general  methods  of  collection  are  the  same  for  both 
classes  of  accounts,  but  in  some  particulars  they  require 
different  treatment.  The  present  chapter  will  therefore 
consider  the  collection  of  city  accounts,  leaving  out-of- 
town  accounts  for  another  chapter. 

Monthly  Statements 

It  is  the  almost  invariable  custom  in  the  mercantile 
world  to  send  a  statement  to  the  customer  on  the  first  of 
the  month  following  the  purchase  of  goods,  and  to  list 
on  this  statement  the  goods  purchased  during  the  month, 
with  the  terms  on  which  these  goods  were  sold.  As  it 
is  a  custom  to  send  out  these  statements,  they  do  not  have 
the  effect  of  "duns,"  but  are  looked  upon  as  merely  mem- 
oranda of  goods  which  have  been  purchased  by,  or 
charged  against,  the  customers. 

These  statements  give  the  customer  the  record  of  his 
purchases  as  they  appear  upon  the  books  of  the  house. 
If,  then,  there  is  any  error  or  misunderstanding  on  either 
side  as  to  the  goods  purchased  or  the  prices  charged,  such 

70 


COLLECTING  CITY  ACCOUNTS  71 

differences  are  discovered  and  can  be  adjusted  at  this 
point;  and  the  matter  being  fresh  In  the  minds  of  all  those 
concerned,  this  can  usually  be  done  without  arousing  any 
lU-wUl  on  the  part  of  the  customer — something  very  de- 
sirable In  this  age  of  competition. 

It  Is  a  frequent  practice,  and  a  practice  to  be  com- 
mended in  certain  lines  of  business,  to  Include  with  the 
statement  a  letter  to  the  customer,  or  perhaps  printed 
matter,  calling  attention  to  some  special  sale,  or  to  a  line 
of  goods  in  which  the  customer  might  be  particularly  in- 
terested. This  not  only  advertises  the  goods,  but  also 
conveys  the  impression  that  the  dealer's  Interest  does 
not  end  when  he  gets  the  customer's  money — that  he  de- 
sires a  continuance  of  the  customer's  patronage. 

The  First  Statement 

Unless  there  Is  some  reason  to  the  contrary,  the  state- 
ment of  account  is  sent  out  on  the  first  day  of  the  month 
following  the  month  of  purchase.  We  will  suppose  that 
this  gives  the  terms  of  the  house  as  cash,  which  usually 
means  that  payment  is  due  and  expected  within  a  reason- 
able time  after  the  first  of  the  month.  Even  though  this 
is  the  case,  some  houses  do  not  send  out  another  statement 
until  the  first  of  the  following  month,  particularly  where 
tile  customers  are  so  thoroughly  good  that  there  is  no 
uneasiness  as  to  the  eventual  payment. 

It  is  here  to  be  noted  that  the  particular  trade  and 
the  character  and  standing  of  the  debtor,  will  Influence 
the  method  by  which  an  account  is  handled.  In  almost 
every  trade  there  are  special  customs  as  to  time,  terms, 
payment,  etc.,  which  control;  and  the  collector  must  be 
familiar  with  these  before  he  is  qualified  to  conduct  his 


72 


THE   ART   OF   COLLECTING 


department  intelligently.  Also,  in  many  cases,  houses  of 
known  standing  and  reliability  have  their  own  pay-day 
on  which  their  accounts  are  paid,  and  with  these  houses 
payment  cannot  be  secured  sooner  without  giving  offense. 
In  such  cases  it  practically  amounts  to  the  purchaser  fix- 
ing his  own  terms;  but  usually  these  terms  are  not  far 
different  from  those  of  the  house  from  which  the  pur- 
chase is  made;  and,  the  purchaser's  trade  being  desirable, 
the  selling  house  is  willing  to  meet  the  purchaser's  re- 
quirements as  to  terms.  In  such  case  a  statement  is  sent 
on  the  first  of  the  month,  but  no  further  attention  is  paid 
the  account  until  the  purchaser's  pay-day  comes  round. 
If  payment  should  not  be  made  on  this  regular  pay-day, 
the  account  will  then  require  prompt  attention,  the  delay 
indicating  some  oversight  or  other  irregularity,  or  pos- 
sibly a  change  of  condition  in  the  purchasing  house. 

Leaving  out  of  consideration  any  special  customs  or 
cases,  we  will  suppose  that  systematic  and  fairly  close 
collections  are  the  rule.  In  such  case,  at  the  time  the  first 
statement  is  sent  out,  a  duplicate  statement  is  put  in  the 
collection  file  ten  days  ahead,  and  this  fixes  the  date  when 
the  account  is  to  be  followed  up  if  it  is  not  previously 
paid. 

The  Second  Statement 

On  or  shortly  after  receipt  of  the  first  statement  many 
customers  will  call  and  pay  their  accounts,  or  will  send 
in  remittances  in  settlement.  When  payment  is  thus  made, 
the  customer's  duplicate  statement  is  removed  from  the 
collection  file;  and  as  far  as  the  collection  manager  is 
concerned,  the  transaction  is  closed.  To  those  who  do 
not  pay  up  on  or  before  the  expiration  of  the  ten-day 


COLLECTING   CITY  ACCOUNTS  73 

period,  a  second  statement  is  sent  out.  The  fact  that 
a  second  statement  has  been  sent  out,  and  the  date  on 
which  it  was  sent,  are  noted  on  each  of  the  duplicate 
statements,  which  are  then  once  more  filed  ten  days  ahead. 
The  second  statement  is  not  itemized,  but  gives  merely 
the  amount  "As  per  statement  rendered,"  this  referring 
to  the  itemized  first  statement. 

The  Third  Statement 

The  second  statement  serves  as  a  reminder  to  the 
customer,  and  will  usually  bring  in  many  remittances.  To 
those  who  are  still  delinquent  a  third  statement  is  mailed 
on  the  20th  of  the  month,  and  the  facts  are  noted  on  the 
duplicate  statement,  which  is  then  carried  forward  to  the 
30th  in  the  collection  file. 

At  the  end  of  this  third  period  the  large  majority  of 
the  accounts  will  have  been  paid,  if  credits  were  wisely 
granted.  It  usually  happens,  however,  that  a  few  ac- 
counts at  least  are  found  on  which  nothing  has  been  paid, 
and  which  are  still  being  carried  thirty  days  after  the  due 
date,  although  no  extension  was  granted. 

Up  to  this  point  the  customer  has  had  no  possible 
reason  for  taking  offense,  as  nothing  has  been  sent  him 
but  a  bald  statement  of  his  account — merely  enough  to 
keep  before  him  its  condition.  Something  more  strenuous 
is,  however,  clearly  necessary  with  the  accounts  still  un- 
paid, and  the  customer's  duplicate  invoice  is  taken  from 
the  regular  files,  placed  in  the  past-due  file,  and  a  systern- 
atic  and  persistent  follow-up  is  begun. 

Nature  of  the  Follow-Up 

At  this  point  some  houses  put  the  accounts  in  the 
hands  of  their  collectors  for  personal  attention.     Indeed, 


74  THE   ART   OF   COLLECTING 

some  few  houses  still  follow  the  practice,  which  used  to 
obtain  quite  generally,  of  placing  the  account  in  the  hands 
of  their  collectors  as  soon  as  the  first  statement  has  been 
sent  out,  or,  in  some  cases,  send  out  the  first  statement 
by  their  collectors.  The  practice  is,  however,  nearly  ob- 
solete, and  as  a  rule  is  neither  economical  nor  advisable. 
The  business  man  of  the  present  day  is  accustomed  to 
receive  his  statements  and  remit  in  payment  by  mail,  and, 
as  long  as  he  pays  up  promptly,  is  inclined  to  resent  per- 
sonal collections. 

Where  collection  can  be  made  by  letter,  the  greater 
economy  of  this  method  is  obvious.  The  letter — usually 
a  form  letter,  even  though  written  to  the  individual,  and 
signed — costs  but  a  few  cents  to  prepare  and  deliver  to 
the  recipient.  A  collection  in  person,  on  the  other  hand, 
requires  the  time  of  a  collector,  and  In  most  cases  car- 
fare, and,  save  in  the  case  of  near-at-hand  accounts,  the 
expense  is  material.  Nor  are  the  results  produced  such 
as  to  justify  the  extra  cost.  Indeed,  In  many  cases  better 
results  are  produced  by  the  use  of  letters. 

Follow-Up  Letters 

The  nature  and  number  of  the  letters  sent  to  de- 
linquent debtors  will  be  governed  by  the  character  of 
the  business  and  the  condition  of  the  particular  account. 
Form  letters  are  sometimes  used  for  this  purpose,  with 
blank  spaces  left  for  the  insertion  of  name,  amount  due, 
and  any  other  special  data.  Where,  however,  an  account 
is  material  In  amount,  or  the  customer  Is  a  regular  or  Im- 
portant one,  It  Is  much  better  to  have  each  letter  written 
out  on  the  t}'pewrlter,  even  though  the  wording  is  taken 
from  form  letters,  and  to  sign  It  either  with  the  name  of 


COLLECTING   CITY  ACCOUNTS 


75 


the  collection  manager  or  with  the  name  of  the  concern. 
When  this  Is  done  the  letter  becomes  In  fact  a  personal 
letter,  and  It  will  receive  far  more  consideration  than 
would  be  accorded  to  a  form  letter,  no  matter  how 
excellent. 

Suggestions  and  forms  for  follow-up  letters  will  be 
found  in  Chapters  ix  to  xiv  of  the  present  volume.  The 
number  used  in  a  series  is  seldom  less  tlian  three  or 
more  than  five.  To  send  a  greater  number  would  seem 
to  be  worse  than  useless,  as  any  debtor  who  can  receive 
five  logical,  adequate,  well-adapted,  dunning  letters,  and 
not  pay  up  in  whole  or  in  part,  or  make  an  adjustment 
of  his  account,  or  give  an  indication  of  financial  vitality 
in  some  other  way,  will  require  something  more  forceful 
than  letter-writing,  if  his  account  is  to  be  collected. 

Operation  of  the  Follow-Up 

When  the  time  for  an  active  follow-up  is  reached, 
three  statements  have  already  been  sent  the  delinquent 
debtor;  his  account  is,  nominally  at  least,  thirty  days  over- 
due; and  the  first  of  the  month  has  been  reached.  On 
this  day  the  first  letter  is  sent  him,  and  If  the  follow-up 
is  to  be  close,  this  Is  followed  up  on  the  5th,  loth,  15th, 
and — if  five  letters  are  sent — 20th  of  the  month;  or,  in 
other  words,  the  letters  go  out  five  days  apart.  The 
matter  is  then  allowed  to  rest  until  the  first  of  the  follow- 
ing month.  The  debtor  has  now  been  given  sixty  days 
from  the  date  of  sending  the  first  statement,  and  If  neither 
payment  nor  any  word  of  explanation  has  been  received, 
the  statement  should  be  given  to  a  collector,  with  instruc- 
tions to  see  the  debtor  and  bring  personal  pressure  to  bear. 
The  number  of  delinquents  for  the  collector  to  look  after 


76  THE  ART   OF  COLLECTING 

will  usually  be  small,  as  the  statements,  together  with  the 
follow-up  letters,  are  effective  with  all  but  the  most 
difficult  cases. 

The  work  of  the  collector  is  considered  more  fully 
in  Chapter  xv,  "The  Collector  and  His  Work."  For 
present  purposes  it  is  sufficient  to  say  that  he  must  use 
every  effort  to  see  the  delinquent  customer,  and,  by  direct 
request,  argument,  persuasion,  and  any  other  lawful 
methods,  try  to  secure  payment.  If  the  customer  suc- 
ceeds in  eluding  the  collector,  or  the  conditions  are  such 
that  the  collector  cannot  see  him,  a  special  delivery  or 
registered  letter  will  sometimes  impress  him  with  the  im- 
portance of  settling  up  or  explaining  why  he  cannot  settle 
up,  or,  better  still,  induce  him  to  call  at  the  store  and  thus 
give  an  opportunity  for  a  personal  interview. 

The  Personal  Interview 

If  the  debtor  can  be  induced  to  call  at  the  store,  the 
collection  manager  has  him  on  his  own  ground,  and,  be- 
fore he  gets  away,  should  be  able  to  make  some  adjust- 
ment of  his  account.  It  is  obvious  that  the  debtor  has 
some  income  at  least,  that  this  will  be  spent,  and  that 
someone  is  going  to  get  it;  and  the  question  is  whether 
that  someone  will  be  the  collection  manager.  He  should 
keep  firmly  in  mind  the  fact  that  the  money  is  due — that 
the  debtor  is  unjustly  keeping  it  from  the  house;  and  he 
should  not  allow  the  debtor  to  take  an  injured  air  or  in 
any  other  way  place  him  at  a  disadvantage.  The  col- 
lection manager  has  a  strong  advantage  in  his  surround- 
ings and  the  conditions,  and  he  should  make  the  most 
of  it* 

In  any  such  case  the  debtor  is  almost  sure  to  start  out 


COLLECTING  CITY  ACCOUNTS 


77 


with  the  usual  hard-luck  story,  which  may  or  may  not  be 
true.  No  matter  whether  it  is  true  or  not,  the  collection 
manager  should  take  an  interest  in  it,  and  let  the  debtor 
feel  that  he  is  sympathetic  and  disposed  to  be  friendly. 
This  will  frequently  lead  the  debtor  to  tell  more  than  he 
had  originally  intended,  and  will  thus  give  a  better  idea 
of  the  actual  conditions,  and  show  whether  these  really 
stand  in  the  way  of  payment 

It  is  usually  good  policy  to  make  no  offers  of  com- 
promise or  adjustment,  but  take  it  for  granted  that  the 
debtor  will  pay  the  full  amount.  There  is  a  moral  effect 
in  this,  for  the  debtor,  feeling  that  the  entire  amount  is 
expected,  will  frequently  of  his  own  accord  suggest  pay- 
ment of  a  part.  In  such  case  he  should  be  allowed  to  state 
just  what  he  can  do,  and  then  such  action  should  be  taken 
as  the  conditions  seem  to  indicate. 

Instalment  Payments 

In  instalment  work  the  amount  of  the  debt  and  the 
character  of  the  debtor  will  necessarily  influence  the  man- 
ner in  which  the  account  is  handled.  When  an  instalment 
debtor  pays  no  attention  to  notices  and  letters,  it  is  usu- 
ally found  that  he  is  possessed  of  but  little  property,  if 
any.  As  a  rule  such  a  debtor  has  no  intention  of  defraud- 
ing the  house  he  is  dealing  with,  but  finds  it  inconvenient, 
difliicult,  or  at  times  impossible,  to  pay.  Tact  and  judg- 
ment are  necessary  to  realize  on  such  an  account;  and  it 
is  usually  a  question  of  working  the  amount  out. 

Frequently — and  particularly  in  the  case  of  wage- 
earners — it  may  be  wise  to  arrange  for  very  small  weekly 
or  monthly  instalments.  Let  the  exact  amount  to  be  paid 
in  each  instalment  be  clearly  understood,  as  also  the  exact 


78  THE  ART  OF  COLLECTING 

date  on  which  these  payments  are  to  be  made.  If  the 
amount  of  tlie  instalments  suggested  by  the  customer 
seems  smaller  than  he  should  make  under  the  circum- 
stances, the  importance  of  larger  payments  should  be 
urged  upon  him — payments  which  will  relieve  him  of  the 
liability  more  promptly  and  also  give  the  instalment  house 
its  money  sooner.  Once  an  agreement  is  reached,  let  the 
debtor  feel  that  it  is  really  an  agreement,  and  that  the 
collection  manager  not  only  expects  him  to  live  up  to  it, 
but  has  implicit  confidence  that  he  will.  Impress  upon 
him  the  advisability  of  calling  at  once  if  any  unforeseen 
reason  comes  up  that  might  possibly  prevent  him  from 
meeting  any  of  the  payments  exactly  as  arranged. 

Keeping  in  Touch  with  Delinquents 

Another  point  to  be  impressed  upon  the  instalment 
debtor  at  this  stage  Is  the  importance  of  keeping  the  house 
fully  informed  of  his  exact  address,  street  and  number,  as 
much  valuable  time  is  lost  in  tracing  debtors  who  have 
moved  and — though  with  no  intention  of  evading  payment 
— have  failed  to  send  their  new  address.  It  is  a  good 
plan  to  stamp  on  receipts,  letters  or  other  communica- 
tions sent  to  Instalment  purchasers  the  following  notice : 

Important! 
Please    do    not    move    without 
notifying  us  of  your  new  address. 

This  suggestion  may  seem  simple,  but  In  practice  It 
will  be  found  a  great  aid  In  keeping  in  touch  with  small 
debtors  of  the  "moving"  class. 

The   collection    manager's   desk   should   be   In   close 


COLLECTING  CITY  ACCOUNTS  79 

proximity  to  the  cashier's  window,  so  that  he  can  see 
customers  who  call  to  make  payments  or  for  other  pur- 
poses, and  talk  to  them  when  he  deems  It  necessary.  If 
customers  who  call  do  not  pay  according  to  agreement, 
the  cashier  should  acquaint  the  collection  manager  with 
the  fact  at  the  time,  so  that  he  can  take  the  matter  up  at 
once  with  the  debtor.  This  should  be  done  In  an  unob- 
trusive manner  that  cannot  give  offense  to  the  debtor; 
as,  for  instance,  if  a  payment  is  not  In  accordance  with  the 
agreement,  the  cashier  might  quietly  inquire  of  the  collec- 
tion manager  If  he  had  changed  the  conditions  of  Mr. 
So-and-So's  payments,  or  if  such  a  payment  were  correct. 
This  Is  In  accordance  with  the  general  principle  that  the 
debtor  should  never  be  unnecessarily  antagonized  or  his 
feelings  be  hurt  more  than  Is  necessary  to  insure  collec- 
tion. There  are  times  when  the  "big  stick"  must  be  used 
In  collecting,  but  it  should  not  be  used  except  when  it  is 
obviously  necessary  for  the  collection  of  the  debt. 


CHAPTER  VII 

Collecting  Outside  Accounts 

Nature  of  Outside  Accounts 

Outside  accounts  are  those  not  located  in  the  same  city 
or  town  as  the  collecting  office.  They  must  for  the  most 
part  be  collected  by  letter,  as  the  expense  of  personal  col- 
lection is — for  the  smaller  accounts  at  least — prohibitive. 
Even  with  accounts  of  large  size,  the  expense  of  personal 
collection  is  a  very  serious  burden,  and  the  mails  are  usu- 
ally relied  upon  for  their  collection. 

While  the  accounts  of  the  usual  retail  concerns  are 
mainly  city  accounts,  the  accounts  of  wholesale  houses, 
manufacturing  concerns,  mail-order  houses,  and  similar 
concerns  are  mainly  out-of-town  accounts.  The  methods 
pursued  in  collecting  outside  accounts  are  much  the  same 
in  the  various  lines  of  business,  varying  only  in  detail. 

Discounts  as  an  Aid  to  Collection 

The  question  of  discounts  is  involved  In  both  city  and 
outside  accounts.  Outside  accounts  are,  however,  usually 
larger  in  amount  than  the  ordinary  retail  city  accounts, 
and  for  this  reason  the  matter  of  dlscoujits  is  more 
important. 

The  time  allowed  for  the  payment  of  accounts  varies 
widely.  The  most  common  terms  are  30,  60  and  90  days. 
Especially  in  manufacturln;^  businesses,  a  discount  Is  given 
for  payment  before  the  net  due  date;  and  this  discount 

80 


COLLECTING  OUTSIDE  ACCOUNTS  8i 

is  usually  sufficient  to  be  a  real  inducement.  For  instance, 
in  some  lines  a  90-day  net  payment  is  allowed,  with  a 
discount  of  2  per  cent  for  payment  at  30  days,  or  i  per 
cent  for  payment  at  60  days,  or  an  additional  discount  if 
payment  is  anticipated  in  10  days.  In  other  words,  if, 
instead  of  waiting  until  the  expiration  of  the  90-day  per- 
iod allowed  him,  the  purchaser  pays  at  the  end  of  30 
days,  he  is  allowed  to  deduct  2  per  cent  from  the  face  of 
his  bill.  This  is,  in  eflect,  paying  him  a  little  over  i  per 
cent  per  month  for  his  money.  In  some  cases  the  discount 
runs  even  higher;  and,  as  the  usual  rate  of  interest  on  bank 
loans  is  6  per  cent  per  annum,  it  is  obvious  that  such  a 
discount  is  a  very  material  concession.  As  a  matter  of 
fact,  good  business  men  expect  to  take  advantage  of  all 
such  trade  discounts,  even  if  they  have  to  borrow  the 
money  to  do  so;  and  the  failure  to  take  all  such  discounts 
and  anticipations  is  looked  upon  as  an  indication  of  weak- 
ness. In  this  way  the  discount  becomes  a  powerful  induce- 
ment for  prompt  payment  of  accounts.  Frequently  the 
discount  privilege  is  abused  by  customers  making  deduc- 
tions after  expiration  of  the  discount  period.  This  should 
not  be  allowed.  The  discount  is  not  a  concession  to  trade, 
but  a  premium  paid  for  the  use  of  that  money  for  a 
certain  definite  time,  and  the  terms  should  be  strictly 
maintained. 

In  some  cases,  where  it  is  desirable  to  hasten  payment 
of  an  account,  a  little  pressure  may  be  brought  to  bear 
without  giving  offense,  by  suggesting  that  the  purchaser 
must  have  overlooked  the  fact  that  the  account  was  sub- 
ject to  discount,  or  he  would  surely  avail  himself  of  It. 
Such  a  suggestion  comes  with  the  appearance  of  solici- 
tude for  the  concern  which  owes  the  account.     If  properly 


82  THE  ART  OF  COLLECTING 

made,  It  cannot  give  offense,  and  frequently  brings  the 
desired  payment. 

Prepayment  of  Accounts 

The  ordinary  discounts  which  obtain  in  any  particular 
line  of  business  are  extended  to  customers  as  a  matter  of 
course.  Occasionally  special  discounts  are  offered  for 
prepayment  of  accounts.  Speaking  generally,  such  offers 
are  "bad  business."  They  indicate  either  that  the  house 
which  makes  the  offer  is  very  hard  pushed  for  money  and 
cannot  borrow  it  in  the  usual  way  and  at  the  usual  rate, 
or  else  that  for  some  reason  it  is  specially  anxious  to  close 
out  the  particular  account.  It  is  inadvisable  to  produce 
either  of  these  impressions  if  it  can  be  avoided.  A  house 
might,  of  course,  be  in  such  financial  condition  that  a  con- 
cession of  the  kind  would  be  justifiable  for  the  sake  of 
securing  ready  cash.  Or  the  collection  manager  may  see 
that  a  concern  now  able  to  pay  is  being  conducted  in  such 
a  way  or  is  encountering  such  conditions  that  it  might 
not  be  able  to  pay  at  the  time  the  account  falls  due,  and 
therefore  deem  an  extra  discount,  even  though  it  were 
heavy,  a  small  price  to  pay  for  the  collection.  Under 
such  circumstances  the  concession  must  be  made  regard- 
less of  the  impression  produced. 

Interest  on  Accounts 

Interest  at  times  enters  into  collection  calculations. 
All  open  accounts  bear  interest  from  the  date  they  fall 
due  until  paid,  and  some  customers,  even  though  they  do 
not  take  their  discounts,  will  pay  on  or  near  the  due  date 
in  order  to  avoid  payment  of  interest. 

In  those  cases  where  discount  for  prepayment  Is  not 


COLLECTING  OUTSIDE  ACCOUNTS  83 

allowed,  the  purchaser  naturally  does  not  care  to  pay  the 
account  until  its  due  date.  If  he  pays  promptly  on  the 
due  date,  well  and  good,  but,  if  he  does  not,  it  may  be 
advisable  for  the  collection  manager  to  call  his  attention 
to  the  fact  that  interest  is  running  against  him  on  the 
overdue  account,  and  suggest  that  a  prompt  remittance 
of  the  amount  will  be  accepted  in  full  settlement,  thus  sav- 
ing the  purchaser  from  accrued  interest. 

Collection  Procedure 

The  method  of  keeping  track  of  outside  accounts  is 
very  like  that  already  described  for  city  collections. 
When  goods  are  shipped,  an  invoice  is  made  out  and  sent 
to  the  purchaser  as  a  matter  of  course.  The  duplicate 
of  the  invoice,  as  stated  in  the  previous  chapter,  is  made 
out  at  the  same  time,  and  comes,  usually  by  way  of  the 
office — where  the  proper  accounting  entries  are  made — to 
the  collection  manager,  who  files  it  in  his  collection  cabinet 
on  the  proper  due  date,  i.  e.,  30,  60  or  90  days  ahead, 
as  the  case  may  be.  When  the  next  due  date  comes  round, 
if  the  account  has  not  already  been  discounted,  a  state- 
ment is  mailed  to  the  customer,  and  this  statement  is  fol- 
lowed— as  described  in  Chapter  iv — by  two  other  state- 
ments at  intervals  of  ten  days  each,  or  at  less  frequent 
intervals  if  the  account  is  not  to  be  followed  so  closely. 

When  the  third  statement  has  been  sent  out  without 
producing  any  result,  the  account  is  placed  in  the  past-due 
file.  At  this  point  the  method  of  handling  the  account 
varies  somewhat  from  that  pursued  in  the  case  of  city 
accounts.  This  is  mainly  due  to  the  difference  in  the 
character  of  the  account,  though  also  in  part  to  the  differ- 
ence in  location.      Personal  visits   from  a  collector  are 


84  THE  ART  OF  COLLECTING 

usually  difficult,  if  not  impossible;  also  the  amounts  are, 
as  a  rule,  larger,  and  the  concerns  owing  them  more 
responsible  than  in  the  case  of  city  accounts.  Also,  the 
fact  that  they  are  out  of  town  renders  another  collection 
process  available  which  is  not  usually  employed  in  the 
collection  of  city  accounts.     This  is  the  draft. 

Follow-Up  Letters 

The  collection  letter  is  the  collection  manager's  main 
reliance  for  out-of-town  accounts.  The  tenor  of  these 
letters,  their  number,  and  the  interval  between  them,  will 
all  depend  upon  the  custom  of  the  house  and  upon  the 
nature  of  the  account.  Collection  letters  of  this  nature 
will  be  found  discussed  at  length  In  Chapters  ix  to  XI 
of  the  present  volume. 

As  already  stated,  in  out-of-town  collections  the  draft 
Is  available — an  agency  not  usually  employed  in  city 
collections.  The  draft  may  precede,  follow,  or  come  in 
connection  with  the  follow-up  letters,  as  the  practice  of 
the  house  or  the  conditions  of  the  particular  account 
may  dictate. 

Drafts 

Drafts  are  a  great  aid  to  collections.  They  are,  as 
a  matter  of  fact,  but  little  more  than  a  presentation  of 
the  account  by  means  of  a  collector,  but  this  collector  is 
a  bank;  and  this  gives  the  presentation  a  formality,  a 
publicity  and  a  weight,  that  makes  it  very  effective.  There 
is  no  real  reason  why  payment  of  a  draft  presented  by  a 
bank  should  not  be  refused  with  the  same  readiness  as  a 
statement  in  the  hands  of  an  ordinary  bill  collector.  As 
a  matter  of  fact,  however,  the  debtor  does  in  most  cases 


COLLECTING  OUTSIDE  ACCOUNTS  85 

feel  an  injury  to  his  credit  in  refusing  to  pay  a  formal 
draft  duly  presented  through  a  bank,  which  he  does  not 
feel  when  he  refuses  a  collector's  request  for  payment. 

Speaking  generally,  drafts  should  not  be  drawn  with- 
out first  notifying  the  debtor,  as  otherwise  the  draft  is 
not  so  likely  to  be  paid,  and  there  is  a  strong  probability 
of  giving  offense.  When,  therefore,  a  draft  is  to  be 
drawn,  the  collection  manager  should  write  a  letter,  in 
such  tenor  as  the  circumstances  may  require,  calling  at- 
tention to  the  condition  of  the  account  and  notifying  the 
debtor  that  he  will  be  drawn  upon  if  the  amount  is  not 
paid  within,  say,  the  next  five  days.  Ample  time  should 
always  be  given  for  the  letter  to  reach  its  destination,  and 
for  its  reply  to  come  back.  If,  at  the  end  of  the  specified 
period,  payment  is  not  forthcoming,  nor  yet  any  satis- 
factory explanation  of  the  delay,  a  draft  is  drawn  and 
deposited  for  collection. 

When  the  amount  is  small  such  drafts  are  usually 
made  payable  at  sight.  Where  the  amount  involved  is 
larger,  it  may  be  wise  to  give  a  few  days  of  grace,  making 
the  draft  payable  at  from  one  to  five  days'  sight,  accord- 
ing to  the  circumstances.  It  is  better,  where  possible,  to 
have  the  draft  come  through  a  bank  other  than  that  at 
which  the  debtor  transacts  his  own  business;  for  the  moral 
effect  is  greater,  and  the  "strange"  bank  is  not  so  likely 
to  favor  the  debtor  by  holding  the  draft  unduly.  Occa- 
sionally a  bank  friendly  to  the  debtor  will  hold  a  draft 
sent  to  it  for  collection  for  several  weeks,  or  until  the 
sender  of  the  draft  has  it  traced. 

The  collection  manager's  draft  is  usually  deposited 
for  collection  in  the  bank  with  which  his  concern  does 
its  business.     A  slip  should  be  pinned  to  the  draft,  con- 


86  TflE  ART  OF  COLLECTING 

taining  any  instructions  that  may  be  necessary  for  tiie 
bank.  If  the  bank  with  which  the  debtor  does  business 
is  known,  the  collection  manager  can  ask  to  have  the 
draft  sent  to  some  other  bank  in  the  town  in  which  the 
debtor  resides.  Where  many  drafts  are  drawn,  it  is  quite 
customary  to  send  to  the  bank  with  them  some  small  fee 
to  cover  collection  charges — usually  ten  cents  for  each 
draft;  and  this  payment  undoubtedly  does  secure  better 
attention  to  the  draft,  and  in  the  long  run  probably  more 
than  justifies  the  expense.  The  matter  is,  however,  op- 
tional with  the  collection  manager,  as  the  banks  make  no 
charge  for  collection  of  drafts. 

The  fact  that  a  draft  has  been  drawn  and  deposited 
in  the  bank  for  collection  does  not  lift  any  responsibility 
for  the  account  from  the  shoulders  of  the  collection  man- 
ager. He  must  still  watch  it  as  closely  as  ever  until  the 
draft  is  paid.  For  this  purpose  his  invoice  should  be 
placed  ahead  in  the  collection  file  such  number  of  days  as 
he  thinks  the  draft  should  require  to  reach  its  destination, 
be  presented,  and  the  funds  or  a  report  be  returned.  If 
at  the  expiration  of  that  time  no  report  has  been  received, 
he  may  either  place  the  invoice  ahead  a  few  days,  so  as 
to  give  the  bank  a  little  additional  time,  or,  if  he  thinks 
best,  call  on  it  for  a  report  as  to  the  whereabouts  and 
condition  of  the  collection. 

Banks  as  a  rule  do  not  make  any  extended  effort  to 
collect  a  draft.  When  it  comes  in  they  give  it  to  a  mes- 
senger for  presentation,  or  in  many  cases  merely  mail  the 
debtor  notice,  stating  that  the  draft  has  been  received, 
and  requesting  him  to  call  and  pay  it.  When  the  draft 
goes  out  by  messenger  he  presents  it  for  payment  and 
leaves  it,  if  it  is  paid,  but  otherwise  brings  it  back  to  the 


COLLECTING  OUTSIDE  ACCOUNTS  87 

bank,  leaving  notice  at  the  office  of  the  debtor  for  him 
to  call  at  the  bank  and  make  payment.  In  either  case  the 
draft,  if  a  "no  protest"  draft,  is  held  over  a  day  or  two 
— or,  as  suggested,  much  longer  at  times — and  then,  if 
not  paid,  is  returned  to  the  party  who  sent  it,  with  the 
briefest  possible  report,  as  "No  attention,"  "No  reply," 
"Not  found,"  or  such  other  statement  as  the  circum- 
stances require.  If  the  draft  is  to  be  protested — as  will 
be  done  unless  it  is  marked  "No  protest,"  or  instructions 
have  been  given  that  it  is  not  to  be  protested — the  formal 
protest  follows  its  non-payment,  and  this  adds  protest 
fees  to  the  expense  of  handling  the  collection  until  and 
unless  these  can  be  recovered  later  from  the  debtor.  If 
the  draft  is  paid,  the  collecting  bank  sends  the  funds  to 
the  bank  from  which  it  received  the  draft;  the  collection 
manager's  concern  is  notified  that  payment  has  been  made; 
and  the  matter  is  closed. 

A  Second  Draft 

Sometimes,  when  a  draft  has  been  drawn  and  re- 
turned unpaid,  it  is  found  effective  to  draw  a  second 
draft.   In  such  case  a  letter  is  written  the  debtor  informing 

him  that  the  draft  drawn  on  him  the  instant  has 

been  returned  unpaid;  that  the  collection  manager  feels 
sure  that  this  could  not  have  occurred  with  his  knowledge; 
and  that  he  is  therefore  asking  his  bank  to  return  the 
draft.  This  letter  may  be  elaborated  as  far  as  is  ad- 
visable, enlarging  on  the  injury  to  the  debtor's  credit  of 
refusing  a  draft,  and  the  collection  manager's  confidence 
in  his  ability  and  willingness  to  pay  this  one  when  it  again 
comes  in. 

This  second  draft  coming  so  closely  on  the  heels  of 


88  THE  ART   OF   COLLECTING 

the  first,  and  preceded  by  a  diplomatic  and  forceful  letter, 
does  bring  a  certain  pressure  to  bear  on  the  debtor,  and 
is  on  occasion  worth  while. 

Express  Collections 

It  is  perhaps  not  generally  known  that  the  express 
companies  undertake  out-of-town  collections.  When  this 
method  is  to  be  employed,  an  itemized  statement  of  the 
account  is  made  up  on  a  regular  bill-head,  a  draft  is  at- 
tached, and  this  is  turned  over  to  the  local  express  agent 
to  be  forwarded.  Or,  if  the  collection  is  in  the  form  of 
a  note,  this  note  is  attached  to  the  statement  of  account 
in  place  of  the  draft.  The  express  company  then  takes 
charge  of  the  whole  matter,  presents  the  account  and 
draft,  and,  if  payment  is  made,  remits  the  amount,  less 
its  charges  for  collection.  The  express  companies  are, 
of  course,  entirely  reliable;  and — as  in  the  case  of  a  bank 
draft — the  publicity  and  formality  of  the  manner  of 
presentation  is  frequently  effectual  when  other  means  fail. 

Free  Drafts 

Another  variation  of  the  ordinary  bank  draft  is  the 
"free  draft"  system  operated  by  many  collection  agencies. 
Under  this  plan  the  agencies  supply  the  collection  manager 
with  a  book  of  draft  blanks  ready  to  be  made  out.  On 
the  back  of  each  draft  are  printed  instructions  notifying 
the  bank  which  presents  the  draft  to  return  it  to  the 
agency — not  to  the  sender — if  the  collection  fails.  If, 
then,  the  draft  is  not  paid,  instead  of  coming  back  to  the 
collection  manager,  it  goes  into  the  hands  of  the  collec- 
tion agency  and  gives  it  authority  to  take  the  collection 
and  the  account  into  its  own  hands.     The  whole  system 


COLLECTING  OUTSIDE  ACCOUNTS  89 

is,  of  course,  a  scheme  of  the  collection  agency  to  get 
business;  but  the  plan  is  sometimes  more  effective  than 
the  ordinary  draft,  as  it  carries  on  the  instrument  itself 
notice  that  the  account  will  go  into  the  hands  of  a  col- 
lection agency  if  it  is  not  paid. 

Salesmen  as  Collectors 

If  neither  letters  nor  drafts  bring  payment  of  a  de- 
linquent account,  it  requires  special  treatment.  If  its 
amount  is  material  and  its  location  not  too  far  distant, 
it  may  be  profitable  to  send  a  collector  to  see  what  per- 
sonal influence  can  accomplish.  If  the  distance  is  too 
great  for  this,  the  salesman  who  covers  that  particular 
territory  can  sometimes  handle  the  matter  to  advantage. 
Salesmen  should  not,  however,  as  a  rule,  be  called  upon 
to  collect  accounts.  Selling  and  collecting  are  to  a  con- 
siderable extent  incompatible.  No  matter  how  disagree- 
able the  collection  manager  may  find  it  necessary  to  make 
himself,  the  salesman  is  not  personally  involved,  and  on 
a  subsequent  trip  he  should  be  able,  by  tact  and  diplomacy 
— by  deploring  the  rudeness  and  overbearing  manner  of 
the  collection  manager,  and  by  judicious  soothing  of  the 
customer's  wounded  feelings — to  smooth  the  matter  over, 
and,  if  he  is  a  real  salesman,  start  another  account  for 
the  collection  manager  to  wrestle  with  later.  If,  how- 
ever, a  salesman  must  first  sell  his  bill  of  goods  and  then 
turn  round  and  force  payment  for  them,  with  all  the  in- 
sistence, the  inflexibility,  and  even  the  "bullying"  that  is 
sometimes  required  of  a  collector,  he  is  thereafter  persona 
non  grata  to  that  particular  customer,  and  can  rarely 
sell  him  goods  again. 


90  THE  ART  OF  COLLECTING 

Collection  Attorneys  and  Agencies 

When  all  else  fails,  the  account,  if  of  sufficient  amount 
to  justify  the  measure,  must  be  placed  in  the  hands  of  an 
attorney  or  collection  agency  for  attention.  Under  such 
circumstances  it  is,  of  course,  very  desirable  that  a  repu- 
table lawyer  or  agency  b^,  retained.  It  is  not  difficult  to 
secure  such  a  representative  in  any  part  of  the  country. 
Directories  of  attorneys  arc  published  in  which  the  names 
of  those  who  make  a  specialty  of  collection  business  and 
who  are  reliable  are  indicated.  Also,  many  of  the  col- 
lection agencies  are  represented  by  attorneys  in  every  part 
of  the  country;  and  collections  referred  to  these  agencies 
are  placed  in  the  hands  of  their  special  attorneys.  The 
agency  makes  itself  responsible  for  the  reliability — 
and  to  a  certain  extent  for  the  ability — of  the  selected 
attorneys. 

The  fees  charged  by  collection  attorneys  are  usually 
lo  per  cent  of  the  amount  collected  on  small  or  moderate 
accounts,  with  a  minimum  fee  of  $3.  On  larger  accounts 
the  percentage  charged  decreases  as  the  claim  increases. 
The  fee  of  the  attorney  or  collection  agency  is  deducted 
from  the  amount  collected  before  this  is  remitted  to  the 
party  to  whom  the  account  belongs. 

The  subject  of  collection  attorneys  and  agencies  and 
of  collection  by  legal  process  is  discussed  in  more  detail  in 
Chapters  XVI  and  xvii  of  the  present  volume. 

Disputed  Claims 

Delayed  payments  are  not  always  the  fault  of  the 
customer.  It  may  be  that  the  account  is  disputed  and  the 
customer  is  unwilling  to  settle  until  it  is  straightened  out. 
If  the  difference  is  material,  or  the  part  of  the  account 


COLLECTING  OUTSIDE  ACCOUNTS  91 

which  is  questioned  cannot  be  segregated,  he  is  entirely 
within  his  rights.  If  the  amount  is  immaterial  it  can  be 
suggested  that  the  customer  reserve  enough  to  cover 
the  claim  until  the  matter  can  be  investigated  and 
adjusted,  and  meanwhile  pay  the  balance  at  once.  If  part 
of  the  account  is  undisputed,  get  the  customer  to  pay  the 
part  that  is  unquestioned,  leaving  the  disputed  portion,  as 
before,  for  consideration  and  adjustment. 

In  any  case  of  dispute,  the  customer's  claims  should 
be  investigated  fully  and  without  delay,  and  he  should,  of 
course,  have  the  benefit  of  fair  and  even  liberal  treatment. 
It  is  but  seldom  that  a  customer  disputes  an  honest  claim 
if  the  whole  matter  is  presented  to  him  clearly  and  fairly. 

Variance  of  Records 

Sometimes  investigation  of  a  "delayed"  account  will 
show  that  the  records  of  payment  on  the  books  of  the 
house  do  not  agree  with  the  payments  the  customer  claims 
to  have  made.  Such  conditions  are  found  most  frequently 
in  the  case  of  instalment  purchases  where  the  time  of  the 
contract  extends  over  a  long  period,  and  calls  for  the 
payment  of  numerous  small  amounts.  The  account  runs 
along  smoothly  for  a  time,  but  then  payments  cease  or 
become  irregular,  and  the  customer  claims  that  the  pay- 
ments credited  to  him  do  not  agree  with  those  he  has 
actually  made.  It  is  then  necessary  to  go  into  the  matter 
carefully  and  find  out  exactly  what  has  really  bceis  paid. 
To  get  at  the  customer's  statement  of  payments  made,  a 
form  similar  to  the  following  may  be  sent  him : 


92 


Folio. 


THE   ART   OF  COLLECTING 

Statement  of  Customer's  Receipts 


DATE      BY  WHOM   SIGNED      NO.   OF  RECEIPT      AMOUNT      ANYTHING   SPECTAi. 


Total. 


The  above  is  a  correct  copy  of  my  receipts. 


(Signature) 


When  this  form  is  filled  out  and  returned  to  the  col- 
lection manager,  he  can  check  over  the  records  of  pay- 
ments as  shown  by  the  customer's  report,  and  the  record 
of  payments  turned  in  by  the  collector  or  sent  in  to  the 
house.  If  the  comparison  shows  that  some  remittance 
claimed  by  the  customer  has  not  been  received,  it  must  be 
traced.  If  the  remittance  was  by  check,  this  is  simple. 
The  check  will  have  been  deposited  by  the  instalment 
house,  and,  if  this  has  been  done,  the  deposited  and  can- 
celed check  goes  back  to  the  customer.  If,  then,  the 
check  was  really  sent,  the  customer  should  be  able  to 
exhibit  the  canceled  check.  If  he  cannot,  it  shows  either 
that  he  did  not  send  the  check  or  that  it  has  gone  astray. 
In  either  case,  the  customer  can  be  called  upon  to  stop 
payment  of  his  check  at  the  bank  and  send  another  check 
for  the  amount.  If  the  transaction  is  straightforward, 
he  will  have  no  hesitation  in  doing  this. 

If  remittance  is  made  by  means  of  any  form  of  paper, 
such  as  a  check,  money  order,  or  exchange,  it  can  be 
readily  traced.     If,  however,  the  customer  alleges  that 


COLLECTING  OUTSIDE  ACCOUNTS 


93 


the  remittance  was  made  In  cash,  the  matter  is  much 
more  difficult.  The  remittance,  though  sent,  may  have 
been  lost  or  stolen  before  it  reached  the  house.  Or  the 
customer,  though  entirely  honest  in  his  belief,  may  not 
have  sent  the  remittance  at  all.  Occasionally  customers 
state  that  remittances  have  been  made  which  were  in  fact 
never  made,  the  claim  being  put  forward  with  fraudulent 
intent.  At  other  times  it  may  be  found  that  employees 
of  the  house  have  intercepted  and  stolen  the  missing  pay- 
ments. Speaking  generally,  however,  the  question  of  a 
cash  remittance  is  purely  one  of  veracity.  Remittances 
should  not  be  made  In  cash;  and  if  the  customer  does 
remit  in  this  form,  the  burden  of  proof  that  the  remit- 
tance has  been  made,  rests  on  him.  If  he  cannot  prove 
the  remittance,  the  loss  is  his.  On  the  other  hand,  where 
a  good  customer  claims  a  cash  remittance  which  has  never 
been  received,  it  may  be  good  business  policy  to  admit  the 
claim  without  question — especially  when  the  amount  is 
small. 

"  Fly-by-Night "  Customers 

It  sometimes  happens  that  a  dishonest  debtor  changes 
his  location  without  notice  to  the  house  from  which  goods 
were  purchased,  this  being  done  with  the  definite  intention 
of  evading  payment  of  the  balance  due.  In  such  case  a 
registered  letter  with  "receipt  requested"  should  be  tried. 
This,  if  sent  to  his  last-known  address,  will  often  be  for- 
warded and  the  receipt  be  returned  to  the  writer.  The 
postmark  of  this  receipt  will  give  at  least  the  name  of  the 
town  where  the  debtor  Is  located;  and  then  he  can  usually 
be  traced  down.  The  name  and  address  of  the  sender 
of  the  registered  letter  should  be  that  of  someone  un- 


94  THE  ART   OF   COLLECTING 

known  to  the  debtor;  and  the  letter  should  be  sent  In  a 
plain  env'elope  or  one  bearing  merely  the  name  of  the 
person  who  signs  the  letter.  Otherwise,  the  debtor  might 
discover  that  it  was  from  a  creditor,  and  refuse  to  have 
anything  to  do  with  it. 

Sometimes  instalment  houses  circumvent  this  form  of 
trickery,  i.e.,  "dishonest"  removals,  by  strategy.  One  plan 
of  the  kind  is  as  follows:  On  the  back  of  the  lease  or 
contract  of  sale  blank  spaces  are  left  to  be  filled  out  by 
the  salesman,  giving  the  names  and  addresses  of  at  least 
three  near  relatives  of  the  customer.  These  will  usually 
be  furnished  without  hesitation  at  the  time  the  purchase 
Is  made,  the  purchaser  supposing  they  are  to  be  used  as 
references — which  in  many  cases  is  true.  But  suppose  the 
debtor,  John  Smith  by  name,  has  left  for  parts  unknown, 
owing  a  balance  of  $ioo  on  his  contract.  The  collection 
manager  then  sends  a  letter  to  each  of  the  relatives  whose 
names  appear  on  the  contract.  This  letter  is  written  on 
the  letter-head  of  the  concern's  attorneys,  Is  apparently 
signed  by  them,  and  reads  somewhat  as  follows: 

Nkw  York  City,  May  14,  1913. 
Mrs.  William  H.  Smith, 
175  Union  Street, 

New  York  City. 
Dear  Madam: 

Some  little  time  ago  your  son,  John  Smith,  was  interested  with 
others  in  the  purchase  of  a  piece  of  property.  It  now  seems  that  the 
title  to  this  property  is  not  entirely  clear,  and  we  wish  to  take  the 
matter  up  with  Mr.  Smith,  to  see  if  we  cannot  get  it  straightened  out. 
We  find,  however,  that  he  has  moved  from  his  former  residence, 
86  State  Street,  and  as  the  matter  is  of  some  importance  to  his  welfare, 
we  trust  that  you  will  give  us  his  present  address. 

We  enclose  stamped  envelope  and  ask  that  you  kindly  answer  at 
once.  Very  truly  yours, 

Willis  &  Jones, 

Attorneys  at  Law. 


COLLECTING   OUTSIDE  ACCOUNTS  95 

This  whole  transaction  must,  of  course,  be  with  the 
know^ledge  and  consent  of  the  attorneys  whose  names  are 
signed  to  the  letter.  Upon  receipt  of  such  a  letter  the 
relatives,  thinking  that  there  is  some  business  deal  in- 
volved which  may  be  of  benefit  to  John  Smith,  will  prob- 
ably give  his  new  address.  In  the  settlement  which  fol- 
lows, the  instalment  house  seizes  the  goods,  and  John 
Smith  may  have  time  for  meditation  behind  prison  bars. 
This  method  of  preserving  the  rights  and  property  of 
the  house  is  not  overly  nice,  but  it  must  always  be  remem- 
bered one  is  dealing  with  a  dishonest  debtor — a  would-be 
thief — and  that  the  ordinary  rules  of  business  etiquette 
do  not  apply. 


CHAPTER  VIII 

Credit  and  Collection  Problems  of  the  Small 
Dealer 

The  Small  Dealer 

Scattered  over  the  country  are  many  thousands  of 
small  dealers.  The  average  capitalization  is  low — perhaps 
a  few  thousand  dollars — but  in  the  aggregate  these  small 
dealers  transact  a  large  volume  of  business.  They  are 
found  in  the  city  and  its  suburbs,  in  large  towns  and  in 
small,  and  at  country  crossroads.  Frequently  they  are 
not  of  sufficient  importance  to  be  rated  in  the  mercantile 
books  at  all,  but  in  the  sum  total  their  transactions  are 
imposing;  and  the  large  wholesale  houses  of  the  country 
look  to  them  for  support. 

The  smaller  the  business,  the  more  Imp>ortant  is  the 
matter  of  collections.  Ready  capital  is  limited  and  must, 
of  necessity,  be  kept  in  hand.  If  the  small  dealer  did  not 
collect  closely,  he  would  not  be  able  to  meet  his  own  pay- 
ments promptly  or  keep  his  business  moving  properly. 
As  a  matter  of  fact,  however,  both  the  accounting  methods 
and  the  collection  practices  of  these  small  concerns  are 
frequently  of  the  most  ancient  and  inefficient  character. 
Better  methods  would  bring  about  fewer  failures,  better 
bank  accounts,  better  business  conditions,  and  a  more 
rapid  promotion  from  the  ranks  of  the  small  concerns. 

96 


PROBLEMS  OF  THE  SMALL  DEALER     97 

The  Elxtension  of  Credit 

The  great  trouble  in  the  case  of  the  small  dealer  is 
the  difficulty  of  refusing  credit.  It  is  not  pleasant  to  de- 
cline to  trust  a  customer  under  any  circumstances,  and 
when  this  customer  prefers  his  request  for  credit  with  a 
tactical  skill  born  of  long  experience,  it  requires  more 
strength  of  character  than  the  average  storekeeper  pos- 
sesses, to  refuse.  Especially  is  this  true  when  there  is 
a  competing  store  and  the  dealer  fears  that  a  refusal  to 
grant  credit  may  drive  the  customer  into  the  arms  of 
this  competitor. 

In  the  country  the  standing  of  those  who  apply  for 
credit  Is  usually  well  known  to  the  dealer,  and  he  under- 
stands exactly  what  risk  he  is  taking.  In  the  city  the 
difficulties  are  greater.  It  is  almost  impossible  for  the 
ordinary  small  storekeeper  to  "size  up"  the  applicants 
for  credit  with  any  accuracy.  Competition  is  keen,  and 
he  cannot  risk  offending  his  customer.  Mrs.  Jones  has 
been  dealing  with  him  quite  regularly  for  three  or  four 
weeks  and  has  always  paid  cash.  Some  fine  day  she  comes 
In  and  buys  a  dozen  eggs,  a  half  pound  of  butter,  and  a 
quarter  pound  of  tea,  and  discovers  that  she  has  not 
enough  money  to  pay  the  bill.  It  is  then  the  most  natural 
thing  in  the  world  for  her  to  suggest,  and  for  him  to 
agree  to,  charging  the  goods  until  "tomorrow" — a  to- 
morrow which  does  not  usually  coincide  closely  with  the 
tomorrow  of  the  calendar;  and  the  account  is  started. 

Securing  Credit  Information 

Many  times  the  small  dealer  gives  credit  when  he 
would  not  if  he  were  an  entirely  free  agent.  It  is  but 
seldom  ^at  he  can  exercise  the  careful  discrimination  that 


98  THE   ART   OF   COLLECTING 

should  govern  the  granting  of  credit.     He  should,  how- 
ever, do  the  best  his  circumstances  permit. 

If  he  must  give  credit  when  he  would  rather  not,  let 
him  keep  this  credit  at  the  lowest  possible  figure.  If  his 
accounts  will  not  justify  the  careful  investigations  and 
close  watchfulness  that  prevail  where  larger  credits  are 
at  stake,  let  him  give  such  care  and  watchfulness  as  he 
can.  To  this  end  he  should  secure  as  full  information 
about  applicants  for  credit  as  may  be  done  without 
neglecting  more  important  matters.  After  the  account 
is  opened,  let  him  watch  the  customer  as  closely  as  he 
can;  and  in  all  cases  of  doubtful  credit  let  him  keep  the 
indebtedness  at  the  lowest  possible  limit. 

The  sources  of  information  for  the  small  dealer  are 
not  as  abundant  as  for  the  credit  man  of  the  larger  con- 
cern. They  are,  however,  sufficient  if  he  knows  how  to 
avail  liimself  of  them.  The  applicant  for  credit  should 
be  closely  questioned.  Other  customers  will  afford  a 
valuable  means  of  securing  information.  References 
given  by  the  applicant  for  credit  will  supply  the  dealer 
with  further  data.  Even  better  than  this,  if  he  is  located 
in  a  large  city  he  should  be  a  member  of  the  retail  credit 
association,  which  keeps  at  its  office  a  secretary  for  the 
purpose  of  supplying  its  members  with  just  the  credit 
information  the  small  dealer  needs. 

Such  an  association  is  co-operative  in  its  workings,  the 
members  coming  to  it  for  information,  and  in  turn  re- 
porting any  derelictions  of  the  people  to  w^iom  they  give 
credit.  As  a  consequence,  the  black  sheep  in  the  fold  so 
guarded  are  pretty  sure  to  find  that  they  are  blacklisted 
and  must  pay  cash  for  what  they  secure;  and  that,  as  far 


PROBLEMS  OF  THE  SMALL  DEALER     99 

as  the  membership  of  that  association  is  concerned,  their 
careers  as  petty  swindlers  are  barred. 

Where  the  credit  association  does  not  exist,  the  small 
dealer  must  make  his  own  investigations.  Frequently  he 
can  secure  much  information  from  his  other  customers. 
Shoppers  at  the  small  stores  are  very  apt  to  be  gossipy, 
and  by  discreetly  leading  up  to  the  affairs  of  the  "credit 
risk,"  the  dealer  can  usually  get  information  in  quantity. 
He  must  use  judgment  in  applying  this  information,  and 
should,  if  possible,  get  the  point  of  view  of  several  of  his 
customers,  as  a  single  opinion  may  be  prejudiced  or  un- 
reliable. When  he  has  this,  he  can  usually,  by  comparison 
and  elimination,  discover  with  fair  accuracy  the  property-, 
standing  and  reliability  of  the  person  who  wishes  the 
charge  account. 

Opening  the  Account 

One  of  the  first  questions  to  ask  the  applicant  for  credit 
is  his  exact  name.  There  are  but  few  names  that  are 
not  more  or  less  closely  and  numerously  duplicated,  and, 
if  the  individual  Is  ever  to  be  traced  in  case  of  need,  his 
full  name  must  be  recorded.  The  storekeeper  must  also 
be  particular  to  get  the  correct  address,  street  and  number, 
of  his  customer,  if  the  town  is  one  of  any  size.  Also, 
where  he  Is  a  newcomer,  his  former  address  should  be 
secured.  Where  the  account  is  likely  to  be  more  than  a 
petty  one,  this  will  give  opportunity  for  Investigating  his 
standing  with  tradesmen  in  the  place  from  which  he 
came.  For  this  purpose  the  applicant  should  be  required 
to  give  the  names  of  at  least  two  merchants  with  whom 
he  has  done  business,  and  a  confidential  letter  should  be 
sent  to  these  merchants  asking  what  amount  of  credit 


lOO  THE  ART  OF  COLLECTING 

they  extended  him,  and  the  manner  in  which  he  met  his 
bills. 

Another  method  of  opening  an  account  and  of  getting 
security  for  its  payment  at  the  same  time,  is  to  require 
the  customer  to  sign  an  application  for  the  line  of  credit 
he  wishes — say  to  the  amount  of  $25.  If  he  is  anxious  to 
get  the  accommodation,  he  will  be  perfectly  willing  to 
sign  this  apphcation,  which  can  be  so  drawn  up  that  it  is  in 
fact  a  note,  giving  the  merchant,  in  case  of  non-payment, 
an  assignment  of  wages  and  a  lien  on  all  personal  property 
and  real  estate  owned  by  the  applicant.  This  note  can 
also  be  made  to  acknowledge  judgment  on  non-payment, 
and  when  properly  drawn  is  a  strong  security. 

If  the  merchant  decides  to  use  this  method,  it  will 
profit  him  to  pay  a  good  attorney  to  draw  up  the  appli- 
cation according  to  the  statutes  of  the  state  in  which  he 
is  doing  business.  The  form  should  contain  the  name  and 
address  of  the  applicant,  the  name  of  the  employer,  the 
wages  received,  the  name  of  his  wife,  the  number  of  chil- 
dren, the  date  of  pay-day,  references,  and  any  other  data 
desired.  The  merchant  will  thus  secure  all  the  informa- 
tion he  needs  from  the  form  itself  and  will  be  sure  that 
he  has  not  overlooked  any  points.  The  form  of  report 
given  in  the  chapter  on  "The  Collector  and  His  Work" 
(Chapter  xv)  covers  all  the  information  which  will  usu- 
ally be  necessary  in  this  application  note. 

If  it  can  be  done  without  giving  offense,  the  smaller 
city  dealer,  or  anyone  else  selling  to  wage-earners,  should 
make  weekly  pa^Tnents  of  accounts  a  condition.  As  a  rule, 
accounts  will  not  reach  serious  proportions  inside  a  week, 
and,  if  the  dealer  insists  strictly  on  weekly  payments,  he 
is  not  risking  a  great  deal.     He  must,  however,  adhere 


PROBLEMS  OF  THE  SMALL  DEALER    i  o  i 

religiously  to  payment  on  the  appointed  date,  or  other- 
wise stop  furnishing  goods.  This  is  the  only  safe  plan 
unless  security  is  taken,  or  unless  the  customer  is  known 
to  have  valuable  unencumbered  property.  Even  then, 
thirty  days  should  be  the  extreme  limit  for  small  accounts. 

Sales  and  Collections 

The  smaller  dealer  should  constantly  keep  in  mind 
that,  no  matter  how  satisfactory  the  volume  of  business, 
his  profits  depend  upon  the  collections  of  his  accounts.  It 
avails  him  nothing  to  sell  goods  if  he  does  not  get  paid 
for  them,  and  goods  in  hand  are  better  than  a  bad 
account. 

The  writer  was  recently  called  in  to  take  charge  of 
the  bad  accounts  of  a  small  concern,  and  found  a  neat 
and  attractive  store,  an  active  and  apparently  prosperous 
business,  and  a  proprietor  thoroughly  in  touch  with  his 
line.     The  profits  were,  however,  disappointingly  small. 

A  very  superficial  investigation  disclosed  the  trouble. 
The  selling,  the  buying,  and  the  ordinary  routine  of  the 
business  were  taking  all  of  the  proprietor's  time  and  that 
of  his  clerk.  As  a  consequence,  accounts  were  not  properly 
attended  to ;  and,  while  sales  were  satisfactory,  collections 
were  not. 

In  taking  over  the  accounts,  the  effects  of  this  neglect 
were  everywhere  apparent.  In  some  cases  the  very  names 
of  customers  were  not  correctly  entered.  In  many  cases 
addresses  were  incorrect  or  were  missing  entirely,  and  ap- 
parently the  proprietor  was  trusting  almost  everyone  who 
came  along.  One  customer  was  credited,  not  because  of 
his  present  financial  ability,  but  because  he  expected  to 
receive  money  from  an  estate,  and  on  this  shadowy  basis 


I02  THE  ART   OF  COLLECTING 

he  had  already  run  up  a  large  bill  and  was  still  getting 
goods. 

The  merchant  is  dealing  with  the  living  present,  not 
the  dead  past  nor  the  visionary  future;  and  credit  should 
be  extended  only  on  existing  security.  What  a  man  is 
going  to  receive  is  no  basis  for  credit — unless  it  be  some- 
thing reasonably  sure,  such  as  wages,  regular  interest, 
or  annuity  payments. 

Collecting  Accounts 

But  if  credit  has  been  given,  the  pressing  question  is 
how  to  make  collection.  The  point  that  cannot  be  too 
strongly  emphasized  in  connection  with  small  accounts  is 
the  necessity  of  a  close  follow-up.  This  is  true  in  a  gen- 
eral way  with  all  accounts,  but  more  particularly  so  with 
the  small  account.  If  it  is  not  closely  followed,  it  is 
neglected,  forgotten  or  purposely  evaded  by  the  debtor. 
If,  on  the  other  hand,  it  is  properly  followed  up,  fraudu- 
lent evasions  will  be  few;  customers  will  never  be  allowed 
to  run  into  debt  beyond  their  means;  and,  if  any  turn 
of  circumstances  makes  it  really  impossible  for  them  to 
pay  what  they  owe,  the  loss  to  the  dealer  will  not  be 
serious. 

Do  not  let  accounts  run  behind.  If  fixed  dates  for 
payment  have  been  agreed  upon,  payment  should  be  made 
upon  those  dates,  or  the  matter  should  be  taken  up  at 
once  for  investigation.  Good  reasons  may  be  given  for  a 
temporary  postponement,  but  if  the  dealer  is  wise  he  will 
not  let  these  postponed  payments  aggregate  any  large 
amount,  unless  as  a  matter  of  friendship  or  charity. 

If  an  account  is  not  paid  promptly  on  the  proper  date, 
the  first  step  is  to  make  out  an  itemized  statement  of  the 


PROBLEMS  OF  THE  SMALL  DEALER    103 

account,  giving  the  debtor's  full  name,  and  either  call  on 
him  or  write  him  a  letter  asking  him  to  call  at  the  store. 
A  heart-to-heart  talk  will  usually  bring  about  an  under- 
standing of  the  situation.  It  will  also  bring  a  good  deal 
of  information  as  to  the  customer's  real  financial  status. 
If  he  cannot  make  full  payment  at  once,  it  may  be  possible 
to  arrange  for  a  certain  amount  down  and  weekly  pay- 
ments for  the  balance.  An  honest  man  will  be  glad  to 
make  such  an  arrangement;  and,  if  collections  are  closely 
followed,  the  money  will  eventually  be  paid.  Or  in  some 
cases  the  customer  may  be  willing  to  give  an  order  on  his 
employer  for  the  money  due.  If  so,  the  employer  must 
be  followed  up  as  regularly  and  carefuUv  as  if  he  were 
the  customer,  until  the  amount  is  paid. 

In  the  case  of  laboring  men  who  are  behind  in  their 
payments  and  will  not  give  an  order  on  their  employers, 
it  may  be  necessary  to  call  on  the  employer  direct,  or  to 
notify  him  of  the  overdue  account  and  request  his  as- 
sistance in  securing  its  payment.  This,  however,  should 
be  done  with  discretion,  or  it  may  result  in  the  dismissal 
of  the  employee,  with  a  resulting  loss  to  the  dealer  of  the 
entire  account. 

The  small  dealer  frequently  encounters  difficult  and 
even  painful  cases — particularly  when  he  is  dealing  in  the 
necessaries  of  life.  Let  him  be  as  easy  in  collections  as 
may  be  with  deserving  debtors,  but  when  he  lets  small 
accounts  run  over,  or  gives  additional  credit  to  customers 
who  are  already  behind,  let  him  recognize  this  as  gen- 
erosity or  charity,  as  the  case  may  be — not  as  business. 

One  exception  to  this  general  statement  must  be  noted. 
A  small  dealer  will  sometimes  "stake"  a  customer  who  Is 
out  of  employment,  or  who  for  some  special  reason  is 


I04  THE  ART  OF  COLLECTING 

unable  to  pay  at  the  time,  and  will  perhaps  carry  him  for 
weeks  or  even  months.  In  such  cases  the  dealer  knows 
the  customer  and  relies  entirely  upon  the  personal  equa- 
tion, feeling  confident  that  the  credit  risk  will  "pull  out," 
will  pay  for  what  he  has  already  had,  and  will  thereafter 
be  a  steadfast  and  profitable  customer.  Such  a  proceed- 
ing is  somewhat  outside  the  realm  of  ordinary  business, 
but  is  entirely  justifiable  and  in  fact  commendable.  The 
dealer  should,  however,  be  sure  of  his  man,  or  otherwise 
he  may  suffer  a  financial  loss,  and  in  addition  a  loss  of 
confidence  in  human  nature,  which  is  even  more  serious. 


Credit  must  be  given.  But  the  dealer  must  remember 
that  it  is  worse  than  useless  to  sell  goods  unless  he  is  paid 
for  them,  and  that  it  is  as  much  a  part  of  his  business  to 
see  that  payments  are  made  as  to  sell  the  goods  in  the 
first  place. 


CHAPTER  IX 

Collection  Letters — General  CoNsroERATiONs 

Requirements 

Of  all  the  letters  the  business  man  is  called  upon  to 
write,  the  collection  letter  is  perhaps  the  most  difficult 
Money  may  be  due,  and  there  is  no  real  reason  why  the 
debtor  should  not  be  asked  to  pay  it.  Nevertheless,  there 
are  few  things  in  business  a  man  resents  so  much  as  a 
request  for  money.  The  collection  letter  must,  therefore, 
not  only  overcome  the  debtor's  natural  reluctance  to  pay, 
but  must  overcome  it  without  injury  to  his,  feelings — at 
least  if  his  good-will  is  to  be  retained.  For  this  reason 
the  collection  letter  requires  intelligent  study  and  much 
care. 

It  is  obvious  that  the  conditions  of  a  debt  will  directly 
affect  the  letter  devised  for  its  collection.  To  a  small  ac- 
count, unless  something  more  is  involved  than  its  mere 
amount,  but  little  time  and  trouble  can  be  devoted.  With 
larger  accounts  the  letter  may,  in  many  cases,  be  nothing 
more  than  a  notification  that  the  account  is  overdue;  in 
other  cases  the  debtor  must  be  persuaded,  must  be 
reasoned  with,  or  must  be  driven  into  payment.  It  is 
obvious  that  no  one  letter  or  series  of  letters  can  be  de- 
vised to  meet  all  cases.  Form  letters  may  be  prepared 
that  will  satisfy  a  majority  of  collection  requirements,  but 
these  letters  must  be  modified  as  required  by  the  peculiar 


io6  THE   ART   OF   COLLECTING 

conditions  of  special  cases,  and  at  any  time  it  may  be 
necessary  to  discard  them  entirely. 

This  is  particularly  true  in  the  collection  of  larger 
amounts,  where  the  sum  involved  is  sufficient  to  justify 
much  care  and  attention.  Here  a  knowledge  of  the  per- 
sonality and  the  condition  of  the  debtor  will  be  found  of 
material  assistance.  It  not  only  enables  one  to  handle 
the  matter  with  intelligent  tact,  but,  by  utilizing  or  refer- 
ring to  some  personal  incident  or  other  matter  in  w-hich 
the  debtor  is  interested,  it  is  often  possible  to  gain  his 
confidence  and  his  good-will,  and  in  this  way  get  him  to 
really  do  the  best  he  can  in  the  matter  of  making  payment. 
It  is  obvious  that  the  form  letter  must  be  abandoned  in 
such  cases. 

No  invariable  rules  can  be  laid  down  for  the  prepara- 
tion of  collection  letters.  In  general  it  may  be  said  that 
to  secure  proper  attention  and — which  is  even  more  im- 
portant— to  bring  the  money  that  is  their  ultimate  object, 
such  letters  should  be  characterized  by  ( i )  clearness,  (2) 
terseness,   (3)   force,  and  (4)  courtesy. 

(1)  Clearness 

The  necessity  for  clearness  in  a  collection  letter,  and 
indeed  in  any  other  business  letter,  will  be  admitted.  It 
is,  howevei,  impossible  to  write  a  clear  letter  unless  a 
clear  idea  exists  in  the  writer's  mind  of  the  ends  to  be 
attained  by  his  letter  and  the  means  by  which  he  expects 
to  attain  them.  He  must  know  what  he  wants  to  say 
and  then  say  it  so  that  its  meaning  is  as  clear  to  the  re- 
cipient as  to  himself.  Paragraph  freely,  so  that  each  idea 
stands  out  strongly  by  itself.  Do  not  bring  in  irrelevant 
material  of  any  kind  that  would  obscure  or  divert  atten- 


COLLECTION    LETTERS— GENERAL  107 

tion  from  the  main  thought;  /.  e.,  that  the  writer  wants 
the  money  due  him.  Above  all  things  do  not  let  personal 
feelings  influence  the  letter  to  its  injury.  At  times- indig- 
nation or  even  anger  mav  be  proper,  but  these  should  be 
used  as  a  means  to  an  end.  The  letter  should  not  be  made 
a  vehicle  to  relieve  the  collection  manager's  feelings  at 
the  expense  of  his  collection. 

At  times  references  to  matters  not  immediately  con- 
nected with  the  collection  of  an  account  help  to  soften  the 
request  for  money.  Thus,  as  already  suggested,  after 
calling  a  customer's  attention  to  his  overdue  account,  the 
letter  might  go  on  to  mention  some  new  line  of  goods, 
or  any  other  relevant  matter  of  possible  interest,  in  order 
to  give  an  incidental  and  inoffensive  air  to  the  demand 
for  payment;  but  even  here,  however,  the  request  for 
money  should  be  clear,  and  should  be  given  sufficient 
prominence  to  prevent  its  being  submerged  and  lost  under 
the  reference  to  special  sales  or  other  such  matters.  The 
announcement  may  and  should  have  a  direct  advertising 
value,  but  its  primary  purpose  is  to  soften  the  harshness 
of  the  request  for  money  and  to  give  it  a  matter-of-course 
air;  and  it  should  be  used  only  in  subservience  to  this  more 
important  purpose. 

(2)  Terseness 

As  a  rule,  a  collection  letter  should  be  terse.  What  is 
to  be  said,  should  be  said  as  fully  as  is  necessary  to  con- 
vey the  desired  meaning,  but  it  should  be  said  in  a  concise, 
pointed  manner.  Long,  involved  sentences  are  entirely 
out  of  place  and  tend  to  weaken  the  letter.  Terseness 
makes  both  for  clearness  and  for  force. 

On  the  other  hand,   terseness  should  not  ordinarily 


loS  THE  ART  OF  COLLECTING 

be  carried  to  the  point  of  brusqueness,  as  this  might  in 
itself  make  the  letter  offensive.  Also,  if  the  account  is 
questioned,  terseness  is  to  be  avoided.  In  such  case  it  is 
politic  to  discuss  the  matter  at  such  length  and  in  such 
detail  as  to  show  that  the  writer  is  really  desirous  of 
getting  at  the  facts.  Indeed,  at  times  a  little  "rambling" 
may  be  advantageous  in  a  collection  letter,  provided  that 
in  this  verbal  traveling  the  writer  does  not  lose  sight  of 
the  main  purpose  of  the  letter — to  collect  money.  The 
principle  involved  here  is  that  of  breaking  the  news  gently. 
You  want  the  money  and  perhaps  you  are  determined  to 
have  it  A  plain  statement  of  the  facts  may  get  it;  but 
you  are  in  many  cases  much  more  likely  to  get  it  if  you 
go  into  much  detail  as  to  your  surprise  and  regret  at  its 
non-payment,  the  trouble  the  delinquency  of  the  debtor  is 
causing  you,  and  the  injury  to  the  customer's  credit  if  you 
are  forced  to  extreme  measures,  etc.,  etc.  The  whole 
matter  is  one  of  discretion. 

(3)  Force 

The  two  characteristics  already  discussed,  i.  e.,  clear- 
ness and  terseness,  are  essential  to  force.  Beyond  this, 
force  requires  the  use  of  such  language  and  such  expres- 
sions as  will  cause  the  recipient  of  the  letter  to  act.  There 
is  nothing  more  forceful  than  simple  Anglo-Saxon,  with 
its  short,  strong  words ;  and  the  collection  manager  will 
do  well  to  cultivate  its  use.  In  a  collection  letter,  above 
all  others,  a  spade  should  be  called  a  spade  and  not  be 
referred  to  as  an  agricultural  implement 

It  may  also  be  noted  that  the  forceful  letter  is  usually 
built  up  of  short  sentences.  A  long,  involved  sentence 
does  not  lend  itself  to  force  of  expression.     A  complex 


COLLECTION    LETTERS— GENERAL 


109 


idea  should  be  expressed  in  a  number  of  short  sentences, 
unless  one  strong,  clear,  and  not  too  long  a  sentence  can 
be  made  to  carry  the  whole  idea. 

(4)  Courtesy 

One  of  the  essential  elements  of  successful  collection 
letter-writing  is  courtesy.  There  are  occasions  when  a 
rough  and  even  brutal  collection  letter  is  a  proper  letter 
to  write;  but  such  occasions  are  rare.  The  collection 
manager  may  at  times  find  it  advisable  to  be  indignant, 
sarcastic,  or  even  angry;  but  he  should  never  violate  the 
rules  of  courtesy  and  sink  into  rudeness  or  brutality,  un- 
less it  Is  clearly  and  unmistakably  necessary  to  gain  his 
ends. 

It  is  one  of  the  elementary  principles  of  successful 
collecting  never  to  offend  a  debtor  If  It  can  be  avoided, 
and  particularly  when  this  debtor  Is  a  customer  with  whom 
future  business  is  desirable.  To  ask  a  man  for  money  Is 
a  delicate  matter  at  the  best,  and  both  courtesy  and  good 
feeling  are  usually  necessary  to  make  the  request  effective 
without  disturbing  the  friendly  relations  between  the 
parties. 

Style 

There  is  always  a  tendency  In  letter- writing  to  Indulge 
in  language  and  expressions  that  are  not  characteristic  of 
the  writer's  conversation.  This  is  not  entirely  to  be  dep- 
recated. A  man  may  be  a  very  effective  talker,  and  yet 
his  style  be  so  loose,  so  defective  as  to  grammatical  con- 
struction, and  so  lacking  in  accuracy,  that  a  letter  In  the 
same  style  would  produce  more  amusement  than  money. 
Speaking  generally,  however,  a  letter  written  In  the  same 


no  THE  ART   OF  COLLECTING 

general  style  you  would  use  in  talking  is — if  you  are  a 
good  talker — much  more  effective  in  every  way  than  one 
that  is  unnatural,  stilted,  and  perhaps  grandiloquent. 

It  is  not  a  bad  idea  when  writing  an  important  letter 
to  imagine  the  debtor  before  you,  and  dictate  as  you 
would  talk  under  such  circumstances.  Naturally  your 
dictated  letter  must  be  more  concise  and  more  directly  to 
the  point  than  your  conversation,  and  it  is  not  possible  to 
bring  in  illustrations  and  explanations  as  freely  as  you  do 
when  you  are  talking.  At  the  same  time,  words  and 
phrases  that  you  would  not  use  in  conversation  are  to  be 
avoided,  and  as  far  as  suitable  the  natural  directness  of 
spoken  language  should  be  employed. 

The  free  use  of  slang  expressions  is  not  to  be  com- 
mended. There  are,  however,  so  many  expressions  in  the 
English  language  that  have  been  crystallized  into  so-called 
slang,  and  the  American  people  are  so  used  to  such  ex- 
pressions, that  an  occasional  word  or  phrase  of  slang  gives 
a  force  which  could  be  obtained  in  no  other  way.  Do 
not,  however,  use  slang  too  freely;  and  use  it  only  when 
it  really  adds  to  the  force  and  effectiveness  of  the  letter. 

Tone  of  Letter 

The  condition  of  the  particular  account  has  a  good 
deal  to  do  with  the  tone  of  the  collection  letter.  It  is 
obvious  that  an  account  which  is  just  due  requires  very 
different  handling  from  one  that  is  badly  in  arrears. 
Courtesy  should  characterize  the  letters  in  both  cases,  but, 
while  the  later  letters  will  be  as  peremptory  and  as 
strongly  expressed  as  they  can  be  made  without  being 
absolutely  offensive,  the  first  letters  will  usually  take  a 


COLLECTION    LETTERS— GENERAL  iii 

tone  of  friendly  confidence  that  payment  will,  of  course,  be 
made,  and  that  the  letter  itself  is  merely  a  reminder. 

It  is  always  unwise  to  write  a  collection  letter  under 
the  influence  of  excitement  or  anger.  If  you  do  write 
under  such  circumstances,  keep  the  letter  until  you  cool 
off;  then  read  it  over,  and  send  it  if  you  still  think  it  wise 
to  do  so.  It  is  safe  to  say  that  in  nine  cases  out  of  ten 
the  letter  will  not  be  sent. 

Appearance  of  Letter 

The  mechanical  construction  and  arrangement  of  the 
collection  letter  is  outside  the  province  of  the  present 
volume.  It  may,  however,  be  suggested  that  the  letter 
itself  should  be  neat,  clean,  and  arranged  according  to 
the  general  form  used  by  the  house;  and  that  the  sta- 
tionery should  be  suitable  both  in  quality  and  style  to  the 
business  it  represents.  A  cheap  letterhead  inevitably  gives 
the  idea  of  a  cheap  concern.  Also,  in  these  days  of  good 
typewriting,  the  letter  should  be  mechanically  good.  If 
form  letters  are  used  with  names,  etc.,  filled  in,  the  filled-in 
portion  should  be  so  well  matched  in  color  and  so  neatly 
inserted  that  it  cannot  be  identified  as  a  form  letter.  A 
letter  that  proclaims  on  its  face  that  it  is  a  form  letter  is 
worse  than  a  printed  notice. 

Suggestions  for  Collection  Letters 

Always  be  sure,  in  writing  a  collection  letter,  that  the 
money  asked  for  is  the  amount  really  due.  Nothing  irri- 
tates a  customer  more  quickly  than  to  be  asked  to  pay 
more  than  he  owes  or  to  pay  an  amount  that  is  not  due 
at  all.  Further,  a  dunning  letter  inaccurate  as  to  amount 
creates   a  bad   impression   of  the   house   from   which   it 


112  THE  ART   OF  COLLECTING 

emanates,  and,  if  the  matter  should  ever  be  brought  into 
court,  the  erroneous  letter  might  be  very  embarrassing 
for  the  collection  manager. 

Even  with  the  most  tactful  treatment,  it  not  infre- 
quently happens  that  a  debtor  becomes  irritated  by  the 
continuous  persistence  of  the  collection  department,  or 
is  aggrieved  by  the  peremptory  tone  of  its  letters.  Some- 
times, indeed,  the  collection  manager  becomes  irritated 
himself  and  lets  this  irritation  crop  out  in  his  letters;  and 
then  the  debtor  has  grounds  for  grievance.  In  such  cases, 
if  the  customer  is  worth  keeping,  he  can  frequently  be 
brought  into  line  by  a  diplomatic  letter  from  some  im- 
portant officer,  or  perhaps  the  head,  of  the  concern.  Such 
letters  are  usually  written  only  when  requested  by  the  col- 
lection manager.  Their  tone  will  vary  with  conditions. 
If  the  collection  manager  has  really  lost  his  temper  and 
written  letters  that  were  too  peremptory  or  were  other- 
wise offensive,  the  official  can  deplore  this  fact,  explain 
that  the  objectionable  letters  were  not  authorized  by  the 
concern,  were  written  without  its  knowledge  and  consent, 
and  regret  exceedingly  the  fact  that  they  were  written  at 
all.  If  this  is  tactfully  done,  it  will  usually  establish  an 
era  of  good  feeling,  and  later  on  in  the  letter  the  official 
can  take  up  the  matter  of  the  debt  and  suggest  some  form 
of  settlement,  or  perhaps  ask  the  debtor  for  suggestions 
on  his  part  as  to  how  the  account  can  be  settled  up  most 
sp  eedily  and  with  the  least  inconvenience  to  him. 

Or,  if  the  collection  manager's  letters  have  been  fully 
justified,  the  official  writing  can  take  his  choice  of  a  num- 
ber of  different  grounds.  He  may  suggest  that  the  col- 
lection manager  did  not  quite  understand  the  situation, 
or  did  not  fully  appreciate  the  consideration  that  should 


COLLECTION   LETTERS— GENERAL 


113 


be  extended  an  old  customer,  or  was  misinformed  as  to 
some  condition,  or  took  the  position  he  did  without 
authority,  etc. 

In  any  such  case  the  elimination  of  the  collection  man- 
ager puts  the  matter  on  an  entirely  different  basis,  and, 
with  proper  handling,  some  settlement  of  the  account 
should  be  possible.  It  is  but  rarely  that  a  man  who  fully 
intends  to  evade  his  debts  takes  umbrage  at  any  collection 
letter,  no  matter  how  emphatic  or  offensive  its  tone. 
Hence,  the  mere  fact  that  a  customer  objects  sufficiently 
to  a  collection  letter  to  voice  these  objections,  is  in  itself 
an  indication  that  he  expects — or  can  be  made  to  expect — 
to  pay.  It  is  then  up  to  the  official  who  takes  the  matter 
in  hand  to  make  the  most  of  the  possibilities. 

Postal  Cards 

Postal  cards  should  rarely  if  ever  be  used  in  making 
collections.  The  only  excuse  for  their  employment  lies 
In  the  fact  that  the  card  can  be  mailed  for  a  penny  and 
saves  stationery.  Its  disadvantages  completely  overbal- 
ance these  small  advantages.  The  postal  card  message 
is  public  property  and  the  debtor  may  very  justly  be 
offended  at  the  publicity  given  to  his  private  affairs. 

In  former  days  the  postal  card  was  frequently  used 
by  collection  managers  just  because  of  the  very  objection- 
able publicity  brought  upon  the  debtor.  The  Federal 
government,  however,  stepped  in  and  blocked  the  scheme. 
A  mere  notice  on  a  postal  card  that  payment  will  become 
due  on  a  certain  date  is  forbidden.  Nor  is  any  matter 
tending  to  cast  a  reflection  on  the  character  or  the  stand- 
ing of  the  person  addressed,  allowable  on  a  postal  card. 


114  THE  ART  OF  COLLECTING 

In  fact,  so  much  is  excluded  that  the  postal  card  is  prac- 
tically disqualified  for  use  in  making  collections. 

Some  circumspection  must  also  be  used  as  to  what 
appears  in  collection  letters.  Libelous  and  abusive  state- 
ments and  threats  are  not  permissible,  and  may  bring  the 
sender  into  trouble  with  the  Federal  authorities,  even 
though  the  letters  are  sent  in  sealed  envelopes.  The  hand 
of  the  Federal  authority  is  heavy;  and  the  collection  man- 
ager should  take  no  chances  of  bringing  it  down  upon 
himself.  In  case  of  uncertainty  he  should  either  keep  to 
the  side  of  undoubted  safety  or  consult  and  be  guided 
by  his  postmaster. 

Collecting  Letters 

The  collection  manager  must  vary  his  letters  to  meet 
conditions.  Form  letters  or  other  good  letters  which 
might  be  adapted  to  his  own  use  or  which  might  give 
him  suggestions  for  letters  of  his  own,  are  always  de- 
sirable, and  he  should  be  constantly  on  the  watch  for 
these.  To  preserve  them,  he  should  have  his  scrap-book 
or  files  in  which  all  such  letters  may  be  kept  in  convenient 
form  for  reference. 

Such  letters  will  come  to  the  collection  manager  from 
various  sources.  His  own  letters  as  he  works  them  out 
and  proves  them  will,  of  course,  be  carefully  preserved. 
He  can  also  secure  letters  by  exchanging  with  other  col- 
lection managers,  and  occasionally  very  good  letters  will 
be  found  in  works  on  letter-writing. 

One  method  of  securing  collection  letters  is  at  least 
interesting.  Some  time  since  a  gentleman  made  a  small 
purchase  from  a  house  noted  for  its  very  excellent  collec- 
tion methods.     On  the  due  date  his  indebtedness  was  not 


COLLECTION   LETTERS— GENERAL  115 

paid.  Statements  were  mailed  him  without  result.  A  let- 
ter went  forward,  but  received  no  attention.  Another 
letter,  and  yet  another,  followed;  but  nothing  happened. 
This  went  on  until  the  patience  and  the  collection  resources 
of  the  house  were  practically  exhausted,  and  a  final  notice 
before  suit  warned  the  delinquent  debtor  that  the  end  had 
come.  Then  he  made  his  appearance,  settled  up  his  ac- 
count with  apologies,  and  explained  that  the  collection  let- 
ters were  so  very  good  and  the  procedure  so  interesting 
that  he  felt  compelled  to  wait  until  the  last  one  had  come 
into  his  possession. 


CHAPTER  X 
Collection  Letters  for  Petty  Accounts 

Small  Accounts  Unavoidable 

It  is  obvious  that  a  small  account  does  not  require  the 
same  treatment,  and  will  not  justify  the  trouble  and  ex- 
pense, which  are  properly  given  to  the  collection  of  more 
substantial  accounts.  In  almost  every  business  some  of 
these  small  accounts  are  found,  and  in  many  cases  their 
total  is  formidable.  Indeed,  in  some  lines  the  small  ac- 
count is  the  mainstay  of  the  business,  the  number  and  ag- 
gregate amount  of  all  compensating  for  the  small  amount 
of  each. 

It  is  true  in  many  cases  that  these  small  accounts  are 
more  trouble  than  they  are  worth,  but  it  is  impossible  to 
avoid  them.  Speaking  generally,  if  the  dealer  gives  credit 
at  all,  he  cannot  discriminate  between  large  and  small 
accounts.  As  a  matter  of  fact,  he  is  practically  forced 
to  bring  accounts  on  his  books  which  he  knows,  at  the 
time,  are  not  justified  by  the  profits  of  the  immediate 
transaction. 

As  small  accounts  are  a  necessary  evil,  it  behooves  the 
dealer  to  devise  some  means  by  which  they  may  be  han- 
dled effectively,  and  with  the  least  trouble  and  expense. 
As  a  rule,  such  accounts  must  be  closely  watched.  If 
they  are  not,  the  customer  forgets  or  neglects  them;  and 
they  drag  along  until  there  is  danger  of  his  becoming 
irritated  by  the  efforts  of  the  concern  to  collect,  or — which 

ii6 


LETTERS  FOR  PETTY  ACCOUNTS  117 

is  even  more  serious — alienated  by  the  mere  disagreeable 
fact  that  the  concern  holds  a  long  overdue  account  against 
him. 

It  must  be  remembered  that  no  cast-iron  rule  can  be 
made  for  the  collection  of  accounts.  The  matter  is  one 
to  be  governed  largely  by  conditions.  The  general  rule 
in  small  accounts  is  to  collect  closely,  but  thoroughly  good 
customers  will  frequently  allow  small  accounts  to  run 
for  months.  They  have  neither  forgotten  the  obligation, 
nor  intend  to  evade  it.  As  far  as  they  are  concerned  the 
matter  is  one  of  small  importance,  and  it  is  merely  a  mat- 
ter of  waiting  until  the  spirit  moves  them.  Of  course, 
the  dealer  might  make  his  rule  rigid,  or,  in  other  words, 
take  the  position  that  if  people  wish  to  buy  from  him  they 
must  do  so  in  accordance  with  his  regulations;  but  the 
majority  of  dealers  cannot,  if  they  would,  afford  such  inde- 
pendence. Too  many  good  customers  would  go  to  more 
accommodating  dealers  elsewhere. 

Close  Collections 

Much  judgment  should  be  employed  in  using  any  set 
of  collection  letters  where  the  customers  are  good  and 
well  known.  Many  houses  never  send  letters  out  to  such 
customers  at  all,  relying  upon  monthly  statements  and 
their  confidence  in  the  individual.  As  a  rule  this  confi- 
dence is  not  misplaced,  though  the  necessity  and  the  wis- 
dom of  the  proceeding  is  open  to  question. 

The  whole  matter  is  one  of  custom,  of  circumstances 
and  of  discretion.  Where  customers  are  used  to  being  fol- 
lowed up  closely,  and  it  is  properly  done,  they  seldom  ob- 
ject to  it.  New  customers,  used  to  longer  terms  or  slacker 
methods  in  other  stores,  may  perhaps  object  at  first;  but 


ii8  THE  ART   OF  COLLECTING 

if  the  service  and  the  goods  supplied  are  as  excellent  as 
the  collections  are  close,  these  new  customers  will  usually 
fall  into  line  and  keep  their  small  accounts  well  paid  up. 
Where  a  house  has  gotten  into  easy-going  methods — 
where  their  customers  are  habitually  allowed  long  and 
uninterrupted  time — where,  in  short,  accounts  are  prac- 
tically left  to  be  settled  at  the  convenience  of  the  cus- 
tomer— any  change  of  practice  is  extremely  difficult  and 
is  very  liable  to  give  offense.  In  such  case,  if  a  more 
systematic  method  of  collection  is  desired,  it  will  require 
a  great  deal  of  explanation,  of  care,  and  of  tact;  and 
even  then  some  good  customers  will  probably  be  offended 
and  leave — temporarily  at  least.  When  such  a  change 
is  to  be  made,  if  it  can  be  reasonably  explained  by  some 
circumstances,  as,  for  instance,  the  introduction  of  a  new 
system  of  bookkeeping,  or  a  change  in  the  organization 
of  the  concern,  it  makes  the  matter  much  easier  and  less 
offensive  to  the  customer. 

Illustrative  Letters — (1)   Good  Customers 

This  series  was  prepared  for  use  where  the  customers 
are  well  known  to  the  concern  giving  them  credit,  and  are 
in  the  main  thoroughly  good  pay.  Accounts  are  con- 
sidered due  on  the  first  of  the  month  following  that  in 
which  the  purchases  were  made;  and  an  itemized  state- 
ment is  sent  out  on  that  date.  If  the  customer  does  not 
respond  within  ten  days,  a  first  letter  is  sent  out  calling 
his  attention  to  the  account.  The  first  paragraph  of  this 
letter  is  the  same  for  all  "first"  letters;  the  second  para- 
graph is  "voiced"  to  suit  the  occasion,  as  in  the  following 
example,  or  is  at  times  omitted  entirely: 


LETTERS   FOR   PETTY  ACCOUNTS  119 

June  10,  1913. 
Mr.  Henry  Pearson, 

198  Pelham  Avenue, 

New  York  City. 
Dear  Sir: 

In  looking  over  our  books,  we  find  a  small  charge  against  you  of 
$2.50  for  goods  purchased  during  May.  We  are  sorry  to  trouble  you 
with  so  small  a  matter,  but  we  always  like  to  get  these  small  accounts 
closed  up  as  near  the  first  of  the  month  as  possible.  Will  you  not 
kindly  send  us  the  amount? 

Or,  better  still,  can  you  not  bring  it  in  yourself?  We  should  be 
glad  of  the  opportunity  to  show  you  something  interesting  in  loose-leaf 
ledgers — something  quite  new,  and,  we  think,  much  more  convenient 
than  the  ledger  you  are  now  using. 

Yours  very  truly, 

Johnson  &  Ames. 

This  is  entirely  friendly  and  could  not  offend  the  most 
sensitive.  With  a  good  customer  it  is  very  apt  to  produce 
a  remittance  or  call.  If  it  does  not,  the  following  letter 
is  sent  out  about  ten  days  later,  with  a  stamped  and  ad- 
dressed envelope  enclosed  for  reply: 

June  20,  1913. 
Mr.  Henry  Pearson, 

198  Pelham  Avenue, 

New  York  City. 
Dear  Sir: 

The  small  amount  due  us  on  your  May  account — $2.50  for  a  half- 
bound  ledger — has  not  yet  been  paid.  Probably  it  has  been  overlooked, 
or  perhaps  you  are  waiting  to  bring  it  in  yourself.  In  any  event,  we 
are  perfectly  willing  to  wait  until  you  are  ready  to  settle  the  matter, 
but  we  should  like  to  know  when  this  will  be,  in  order  to  avoid  the 
annoyance  to  you  and  the  expense  to  us  of  unnecessary  reminders. 

We  are  enclosing  a  return  addressed  envelope.  If  you  do  not 
care  to  settle  the  matter  now,  will  you  kindly  advise  us  just  when  you 
will  do  so? 

Yours  very  truly, 

Johnson  &  Ames. 

This  letter,  again,  can  hardly  give  offense  and  should 
bring  a  remittance — or  a  date.     If  no  attention  is  paid  to 


I20  THE  ART  OF  COLLECTING 

it,  the  following  letter  may  appeal  to  the  debtor's  sense 
of  humor,  and  should  produce  results : 

June  30,  1913- 
Mr.  Henry  Pearson, 

198  Pelham  Avenue, 

New  York  City. 
Dear  Sir: 

Your  May  account — $2.50 — is  still  outstanding  and  is  giving  our 
bookkeeper  much  concern.  He  has  been  figuring  very  diligently  and 
now  lays  before  us  the  following  estimate  of  expense  in  connection  with 
the  account: 

One  statement 04 

Two  letters  at  6c.  each 12 

Present  letter 06 

Total   22 

In  other  words,  he  says  it  has  already  cost  us  22  cents  to  collect 
$2.50 — and  the  $2.50  is  not  collected  yet.  Will  you  not  relieve  him 
from  further  calculations  and  ourselves  from  further  expense  by  a 
remittance  ? 

Yours  very  truly, 

Johnson  &  Ames. 

If  this  letter  does  not  secure  attention,  the  account,  if 
in  the  city,  had  better  be  placed  in  the  hands  of  a  tactful 
collector  for  personal  effort.  Or,  if  the  house  deems  pay- 
ment more  important  than  a  continuation  of  the  customer's 
patronage,  a  rough-shod  letter  might  be  written  that 
would  either  shame  him  into  paying  or  drive  him  away 
completely.  Out-of-town  accounts  might  at  this  stage  be 
drawn  upon — after  notice. 

As  a  rule,  a  customer  who  lets  a  small  account  of  this 
sort  run  without  attention  of  any  kind  to  letters  in  regard 
to  it,  is  not  a  good  risk  and  had  better  be  dropped  from 
the  list  It  does,  however,  sometimes  happen  that  a 
really   worth-while   customer  lets   the   matter    run   over 


LETTERS  FOR  PETTY  ACCOUNTS     121 

through  neglect,  or  because  he  feels  so  sure  of  his  standing 
with  the  house  that  he  makes  it  await  his  entire  con- 
venience. Even  in  this  case  he  should  answer  the  second 
letter  of  the  present  series. 

Illustrative  Letters — (2)  Insistent  Collection 

The  following  series  of  collection  letters  was  designed 
for  a  business  much  the  same  as  that  just  considered,  in 
which  the  customers  are  good  for  the  most  part,  but 
neglectful  of  their  small  accounts.  Collections  are  closer 
and  more  insistent  than  in  the  preceding  series,  and  much 
less  care  is  taken  to  avoid  offense.  It  is  assumed  that  the 
accounts  are  due  and  that  there  is  no  reason  why  they 
should  not  be  paid;  and  payment  is  asked  for  frankly 
and  with  some  measure  of  bluntness.  Payment  is  due 
on  the  first  of  the  month  for  purchases  of  the  preceding 
month. 

On  the  first  of  the  month  a  statement  goes  out.  If  no 
attention  is  paid  to  this,  the  following  letter  is  sent  out 
on  the  15th: 

Detroit,  Mich.,  May  15,  1913. 
Mr.  William  Cole, 

13  State  Street, 

Trenton,  N.  J. 
Dear  Sir: 

Statement  of  your  account  was  sent  you  a  few  days  ago,  but  we 
have  heard  nothing  from  you.  The  amount  due  us — $7.50 — is  small, 
and  doubtless  the  matter  has  been  overlooked.  We  would  not  bring 
the  matter  up  again  so  soon  were  it  not  for  the  fact  that  we  carry  a 
large  number  of  these  small  accounts  on  our  books,  and  delays  in 
settlement  make  us  some  little  expense  and  a  great  deal  of  trouble. 

We  know  you  will  appreciate  this  fact,  and  we  trust  you  will  send 
us  a  remittance  by  return  mail. 

Yours  very  truly, 

Ellis  Stationery  Co. 


122  THE  ART   OF   COLLECTING 

If  this  letter  does  not  bring  a  remittance  or  a  reply, 
fifteen  days  later — or  sooner  if  closer  collection  seems 
advisable — the  following  letter  is  sent  out: 

Detroit,  Mich.,  May  30,  1913- 
Mr.  William  Cole, 

13  State  Street, 

Trenton,  N.  J. 
Dear  Sir: 

We  wrote  you  on  the  15th,  asking  for  a  remittance  in  settlement 
of  your  overdue  account  of  $7.50.  We  do  not  wish  to  annoy  you  by 
too  great  insistence  in  the  matter,  but,  as  you  can  readily  understand, 
delay  in  payment  means  expense  and  trouble  for  us,  not  justified  by 
the  size  of  the  account. 

Will  you  not  save  us  any  further  correspondence  in  the  matter  by 
sending  in  your  remittance? 

Yours  very  truly, 

Ellis  Stationery  Co. 

If  this  letter  does  not  produce  results,  the  account  is 
usually  placed  in  the  hands  of  a  collector  for  personal 
effort.  If  too  remote  for  this,  a  letter,  followed  by  draft, 
is  tried. 

Detroit,  Mich.,  June  10,  1913. 
Mr.  William  Cole, 

13  State  Street, 

Trenton,  N.  J. 
Dear  Sir: 

We  have  sent  you  statement  and  have  written  you  twice  in  refer- 
ence to  your  overdue  account  of  $7.50.  Neither  statement  nor  letters 
have  received  any  attention.  If  there  is  any  reason  why  the  account 
should  not  be  paid,  we  shall  be  glad  to  know  it.  If  there  is  not,  we 
shall  expect  a  remittance. 

If  we  do  not  hear  from  you  by  the  20th,  we  shall  draw  upon  you 
for  the  amount. 

Yours  very  truly, 

Ellis  Stationery  Co. 

If  neither  this  letter  nor  the  draft  brings  any  response, 
the  following  letter  has  been  found  very  effective: 


LETTERS  FOR  PETTY  ACCOUNTS     123 

Detroit,  Mich.,  July  i,  1913. 
Mr.  William  Cole, 

13  State  Street, 

Trenton,  N.  J. 
Dear  Sir: 

We  have  an  account  against  you  of  $7.50  for  goods  which  you 
have  received.  We  have  sent  you  statements  of  account  and  have 
written  you  requesting  payment.  We  have  also  drawn  upon  you  for 
the  amount.  Our  letters  have  received  no  reply.  Our  draft  is  returned 
unpaid. 

In  the  history  of  our  business  we  have  found  that  there  are  two 
classes  of  men  who  treat  our  accounts  in  this  manner :  First,  those 
who  are  entirely  honest  and  fully  intend  to  pay  us,  but  who  are  slow 
getting  round  to  it  or  are  forced  by  circumstances  to  delay ;  and, 
second,  those  who  are  plain  deadbeats  and  have  no  intention  of  paying 
unless  they  are  forced  to. 

We  believe  you  to  be  of  the  first-named  class,  but  unless  we  hear 
from  you  immediately  with  a  remittance  or  with  an  explanation  of 
your  failure  to  pay,  we  shall  be  obliged  to  treat  you  as  though  you 
belonged  to  the  second  class,  and  put  the  matter  in  the  hands  of  an 
attorney  in  your  vicinity  for  collection. 

We  shall  wait  until  July  loth  before  taking  this  action,  and  trust, 
for  your  own  sake  as  well  as  ours,  that  we  may  have  some  word  from 
you  before  that  time. 

Yours  very  truly, 

Ellis  Stationery  Co. 

Illustrative  Letters — (3)  Corporation  Accounts 

In  the  business  in  which  these  letters  are  used  the 
amounts  are  small,  and  the  customers  are  usually  excel- 
lent credit  risks.  In  fact,  they  are  largely  found  among 
the  well-known  and  responsible  corporations  of  the 
country. 

Purchasers  of  this  calibre  are  very  apt  to  have  their 
own  rules  as  to  payment  of  accounts.  In  some  cases  small 
accounts  are  paid  the  following  month.  Others  take  30, 
60  or  90  days.  In  all  cases  they  wish  accounts  to  pass 
through  their  regular  routine,  whatever  it  may  be.  Hence, 
even  though  the  nominal  terms  of  sale  in  the  creditor's 


124  THE   ART   OF  COLLECTING 

business  are  cash  on  the  first  day  of  the  month  following 
that  in  which  the  purchases  were  made,  the  ordinary  rules 
for  close  collections  are  not  applicable.  A  close  follow-up 
would  undoubtedly  in  many  cases  induce  a  prompt  pay- 
ment; but  it  would  inevitably  alienate  the  customer.  In 
other  words,  the  purchasers  recognize  the  fact  that  they 
are  desirable  customers,  and  must  be  dealt  with  on  their 
own  terms  or  not  at  all. 

In  following  up  customers  of  this  character  it  is  ob- 
vious that  letters  must  bring  the  personal  note  into  play. 
The  amount  at  stake  is  a  small  one  for  both  parties,  and, 
if  the  account  is  correct,  will  usually  be  paid  without  ques- 
tion when  the  pay-day  of  the  customer  is  reached.  All 
that  is  needed  is  to  keep  the  account  before  the  customer 
so  that  it  is  not  overlooked  or  neglected.  The  various 
persuasive,  forceful  and  ingenious  letters  written  to  in- 
dividuals and  concerns  of  less  certain  standing  are  entirely 
out  of  place. 

In  practice,  on  the  first  of  the  month  on  which  the  ac- 
count is  due,  a  detailed  statement  is  sent  the  customer. 
Nothing  further  is  done  that  month.  If  the  customer 
likes  to  remit,  well  and  good.  If  he  does  not,  no  special 
notice  is  taken  of  the  fact  until  the  first  of  the  following 
month.  On  this  date  a  second  statement  is  sent  out,  on 
which  is  stamped : 

Please  Remit. 
Or,  if  a  little  greater  urgency  is  deemed  advisable — 

Past  Due! 
Please  Remit. 

This  winds  up  the  collection  procedure  for  the  second 
month,  the  accounts  running  over  until  the  first  of  the 


LETTERS  FOR  PETTY  ACCOUNTS  125 

following  month,  or  sixty  days  from  the  due  date.  A 
short  statement  is  then  sent  out  accompanied  by  the  fol- 
lowing very  simple  collection  letter : 

New  York,  May  i,  1913. 
Howard  Manufacturing  Co., 

79  Calvert  Street, 

Baltimore,  Md. 
Gentlemen  : 

We  are  enclosing  herewith  statement  of  your  account,  which  is 
now  overdue.  The  matter  is  a  small  one,  and  we  suppose  it  has  been 
overlooked.    We  shall  greatly  appreciate  a  remittance  by  return  mail. 

Yours  very  truly, 

Harley- Wilson  Paper  Co. 

With  accounts  of  this  character,  if  the  customer  acts 
at  all,  it  will  be  to  send  in  his  remittance.  The  matter 
is  not  of  sufficient  importance  for  him  to  write  unless 
perhaps  there  is  some  error  in  the  charge.  In  such  case 
he  is  very  apt  to  voice  his  objections,  and,  if  he  does,  his 
complaint  should  be  taken  up  at  once  and  the  matter  be 
adjusted  then  and  there. 

If  the  foregoing  letter  does  not  produce  any  result, 
the  matter  rests  until  the  first  of  the  following  month, 
when  the  account  is  ninety  days  overdue.  The  second 
letter  of  the  series  then  goes  out: 

New  York,  June  i,  1913. 
Howard  Manufacturing  Co., 

79  Calvert  Street, 

Baltimore,  Md. 
Gentlemen : 

We  have  not  yet  received  a  remittance  in  settlement  of  the  account 
against  you.  The  amount  is  small — $7 — but  it  is  expensive  and  trouble- 
some to  carry  these  small  accounts  so  long,  and  we  shall  hope  to 
receive  a  remittance  in  settlement  by  return  mail. 

If  this  does  not  reach  us  by  the  loth,  we  will  draw  upon  you  at 
sight  for  the  amount. 

Yours  very  truly, 

Harley- Wilson  Paper  Co. 


126  THE  ART  OF  COLLECTING 

If  this  letter  does  not  produce  a  remittance  or  a  reply 
of  some  kind,  a  draft  should  be  drawn  upon  the  loth,  or 
such  other  date  as  may  have  been  specified.  Unless  the 
concern  Is  a  very  poor  risk,  or  otherwise  has  some  griev- 
ance in  respect  to  the  account — in  which  case  the  draft 
wiU  probably  provoke  a  letter  of  some  kind — the  draft 
will  be  paid.  If  It  is  not  paid,  a  short  letter  is  written 
somewhat  in  the  following  style: 

New  York,  June  15,  1913- 
Howard  Manufacturing  Gx, 

79  Calvert  Street, 

Baltimore,  Md. 
Gentlemen  : 

We  have  written  you  twice  in  reference  to  the  amount  due  us. 
These  letters  have  not  received  the  courtesy  of  a  reply.  We  have 
drawn  upon  you  and  the  draft  has  not  been  paid.  If  we  do  not  hear 
from  you  by  the  20th,  we  shall  place  the  account  in  the  hands  of  our 
attorney. 

Why  should  you  subject  us  to  this  expense  and  yourselves  to 
injury  to  your  credit  to  postpone  payment  of  this  very  small  amount? 
The  account  is  long  overdue.     Why  not  send  us  a  check? 

Yours  very  truly, 

Harley- Wilson  Paper  Ca 

If  this  letter  does  not  produce  results,  the  account 
might  as  well  be  placed  In  the  hands  of  an  attorney  or 
collection  agency  at  once.  The  concern  is,  under  such 
circumstances,  undoubtedly  poor  pay;  and  the  size  of  the 
amount  hardly  justifies  further  direct  effort. 

Illustrative  Letters — (4)  Indorsement  Plan 

In  a  business  such  as  considered  under  the  preceding 
series  of  letters,  the  same  effect  is  secured  almost  If  not 
quite  as  well  by  means  of  rubber-stamp  indorsements  on 
the  statements.     The  customers  are  thoroughly  good — 


LETTERS  FOR  PETTY  ACCOUNTS     127 

with  a  very  few  exceptions — and  the  admonition  of  the 
rubber  stamp  will  bring  the  matter  to  mind  almost  as 
effectively  as  would  a  collection  letter. 

Under  this  plan  the  first  statement  is  sent  out  on  the 
first  of  the  month  following  the  purchase,  i.  e.,  the  due 
date  of  the  account.  The  second  statement  is  sent  out  on 
the  first  of  the  second  month,  thirty  days  after  the  ac- 
count is  due,  with  the  following  indorsement  stamped 
upon  it: 

Account  Past  Due  ! 
A  remittance  will  be  appreciated. 

If  this  produces  no  result,  on  the  first  of  the  third 
month,  when  the  account  is  sixty  days  overdue,  a  state- 
ment is  sent  out  indorsed  as  follows : 

Account  60  Days  Overdue! 
Please  remit. 

A  blank  is  left  in  this  stamp  where  the  number  of  days 
appears  and  the  "60"  is  filled  in  at  the  time  the  stamp  is 
put  on.  As  the  stamp  is  always  used  at  the  60-day  period, 
the  number  60  might  be  incorporated  in  the  stamp  itself, 
but  the  insertion  of  the  number  gives  a  personal  touch 
that  has  a  certain  value. 

If  no  attention  is  paid  the  60-day  statement,  a  third 
statement  is  sent  out  fifteen  days  later,  stamped  as 
follows : 

Account  90  Days  Overdue! 
We  shall  draw  if  remittance  does  not 
reach  us  before  the 

The  numbers  are  filled  in  on  this  stamp  with  the  pen, 
as  before.     If  this  statement  does  not  produce  the  desired 


128  THE  ART  OF  COLLECTING 

effect,  a  draft  should  be  drawn  on  the  stated  date,  and, 
if  this  is  returned  unpaid,  the  matter  is  one  for  the  con- 
cluding letter  of  the  preceding  series,  and  thereafter  for 
collection  by  legal  proceedings. 


CHAPTER  XI 

Collection  Letters  for  Larger  Account* 

Handling  Larger  Accounts 

The  larger  the  amount  involved,  the  more  care  should 
the  credit  man  exercise  in  extending  credit.  On  the  other 
hand,  customers  who  wish  the  larger  credits  are  usually 
better  known  and  more  easily  looked  up,  and  the  larger 
account  should  therefore  be  a  surer  risk  than  the  small 
one.  Once  credit  is  granted,  however,  it  is  the  duty  of 
the  collection  manager  to  see  that  the  accounts  are  paid 
with  reasonable  promptness  and  that  the  house  incurs 
no  loss  through  any  negligence  or  over-confidence  of  his. 

Illustrative  Letters — First  Series 

As  in  the  case  of  any  other  account,  the  collection  man- 
ager sends  out  his  statement  on  the  due  date.  Fifteen 
or  thirty  days  later,  or  at  such  other  interval  as  the  policy 
of  the  house  may  determine,  a  second  statement  goes  for- 
ward, and  even  a  third,  before  anything  more  aggressive 
is  done. 

When  the  end  of  the  statement  period  has  been 
reached,  a  collection  letter  is  sent  out  calling  attention  to 
the  account.  Until  the  contrary  is  proved,  it  is  pre- 
sumable that  the  customer  is  a  desirable  one,  and,  while 
all  the  letters  should  be  courteous  and  politic,  the  first  two 
or  three  must  be  phrased  with  special  care  to  avoid  giving 
offense.     The  problem  at  this  stage  is  to  get  the  money 

129 


130  THE  ART  OF  COLLECTING 

promptly,    but   to   do   it  without   driving   away   or   even 
ruffling  the  feelings  of  sensitive  customers. 

The  following  first  letter  is  strongly  suggestive,  but 
is  friendly  in  tone  and  should  not  give  offense: 

New  York,  June  i,  I9i3- 
Messrs.  John  H.  Davis  &  Co., 

71S  Sansom  Street, 

Philadelphia,  Pa. 
Gentlemen: 

Did  you  receive  our  statement  of  account  sent  you  on  the  ist? 
You  may,  of  course,  have  postponed  its  consideration,  but  you  are 
always  so  regular  in  your  remittances  that  we  think  the  statement 
must  have  gone  astray.    If  so,  we  shall  be  glad  to  send  you  a  duplicate. 

Yours  very  truly, 

Medford  Shoe  Co. 

This  serves  as  a  reminder,  and,  where  the  concern  is 
first-class,  will  usually  bring  a  response  of  some  kind.  If 
the  customer  is  new,  the  explanation  that  he  pays  his 
accounts  regularly  must,  of  course,  be  modified.  In  such 
case  the  following  phrase  might  be  substituted:  "but  we 
know  so  well  your  reputation  for  promptness  that  we 
think  the  statement  must  have  gone  astray." 

If  no  response  is  received  to  the  first  letter,  the  next 
letter  of  the  series  will  follow  at  the  proper  interval. 

New  York,  June  15,  1913. 
Messrs.  John  H.  Davis  &  Co., 

718  Sansom  Street, 

Philadelphia,  Pa. 
Gentlernen: 

Can  you  not  send  us  a  remittance  in  settlement  of  your  May 
account,  or  let  us  have  a  part  of  it,  at  least?  We  are  always  glad  to 
get  money,  but  we  can  use  it  to  such  great  advantage  right  now  that 
we  shall  appreciate  a  remittance  much  more  than  ordinarily  would  be 
the  case. 

We  know  you  will  understand  the  situation  and  shall  hope  to 
hear  from  you  by  return  mail. 

Yours  very  truly, 

Medfobs  Shok  Ca 


LETTERS   FOR   LARGER  ACCOUNTS         131 

A  concern  of  any  credit  standing  will  hardly  let  these 
two  letters  pass  without  notice.  If  neither  remittance 
nor  reply  is  received,  more  vigorous  measures  are  neces- 
sary.    The  following  letter  may  then  be  used: 


New  York,  July  i,  1913. 
Messrs.  John  H.  Davis  &  Co., 

718  Sansom  Street, 

Philadelphia,  Pa. 
Gentlemen: 

We  have  written  you  twice  in  reference  to  your  account  and  are 
still  waiting  for  a  reply.  More  serious  than  this,  we  are  still  waiting 
for  a  remittance. 

As  you  are  aware,  your  account  is  much  overdue,  but  you  have  not 
given  any  reason  for  your  failure  to  remit.  If  anything  is  wrong,  let 
us  know  at  once.  If  not,  we  shall  expect  you  to  send  us  a  remittance 
in  full,  or  in  part,  by  return  mail. 

If  we  do  not  hear  from  you  by  the  loth,  we  shall  draw  for  the 
amount 

Yours  very  truly, 

Medford  Shoe  Co. 


If  this  letter  does  not  secure  attention,  a  draft  will, 
of  course,  be  drawn  on  the  specified  date.  Frequently  a 
letter  is  sent  at  the  same  time,  notifying  the  customer  that 
the  draft  has  been  drawn.  Such  a  letter  is,  of  course,  en- 
tirely proper,  and  in  some  cases  will  undoubtedly  have  a 
good  effect  As,  however,  the  debtor  has  already  been 
notified  that  the  draft  will  be  drawn,  a  second  letter  can 
hardly  be  considered  necessary. 

If  the  draft  is  returned  unpaid,  a  fourth  letter  might 
be  written,  as  follows: 


132  THE  ART  OF  COLLECTING 

New  York,  July  25,  1913. 
Messrs.  John  H.  Davis  &  Co., 

718  Sansom  Street, 

Philadelphia,  Pa. 
Gentlemen: 

We  have  written  you  three  times  in  reference  to  your  account  of 
$325,  Avhich  is  long  overdue.  We  have  drawn  upon  you  for  the  amount. 
Our  letters  have  been  unanswered  and  the  unpaid  draft  is  returned  with 
the  indorsement,  "No  attention." 

Why  do  you  ignore  the  matter?  We  trusted  you  with  our  goods, 
and  your  failure  to  pay  us  or  even  to  explain  your  failure  is  not 
courteous  or  even  strictly  honest. 

It  still  seems  to  us  there  must  be  some  misunderstanding  in  the 
matter,  and  we  hesitate  to  involve  you  in  the  expense  and  injurious 
publicity  of  collection  by  legal  process  unless  you  force  us  to  do  so. 

If  you  can  remit  even  in  part,  we  shall  be  glad  to  extend  yoi^ 
every  possible  consideration,  but,  unless  we  hear  from  you  in  some 
way  before  August  ist,  we  shall  place  the  matter  in  the  hands  of  our 
attorneys. 

Yours  very  truly, 

Medford  Shoe  Co. 

When  the  account  reaches  this  point,  considerations 
for  the  customer's  feelings  have  but  little  weight;  and  the 
account  Is  to  be  collected  In  any  way  that  Is  most  effective. 
Special  letters  may  be  tried,  or  the  account  be  placed  at 
once  In  the  hands  of  an  attorney  or  collection  agency. 
Such  customers  are  obviously  undesirable,  save  on  a  cash 
basis;  and  If  they  are  handled  in  a  businesslike  way,  they 
are  just  as  likely  to  come  back  to  the  concern  for  their 
cash  purchases — unless  they  can  find  someone  else  who 
will  give  them  credit — as  to  go  elsewhere. 

Illustrative  Letters — Second  Series 

The  following  somewhat  short  and  summary  method 
of  dealing  with  accounts  Is  employed  by  a  well-known 
New  York  concern  dealing  largely  with  jobbers.  A  state- 
ment of  goods  purchased  Is  given  the  customer  at  the  time 


LETTERS   FOR   LARGER  ACCOUNTS         133 

the  purchase  is  made.     The  terms  of  payment  are  In- 
variably thirty  days. 

No  statement  Is  sent  out  on  the  due  date,  as  the  cus- 
tomers are  themselves  supposed  to  keep  track  of  accounts 
payable.  If,  however,  a  remittance  is  not  received  within 
ten  days  of  the  due  date,  a  statement  is  sent  out  with  the 
following  brief  letter: 

New  YorKj  June  15,  1913- 
Mr.  Milton  A.  Harlow, 

816  Euclid  Avenue, 

Cleveland,  Ohio. 
Dear  Sir: 

Please  find  enclosed  statement  of  your  account,  due  on  the  5th 
Will  you  kindly  remit  in  settlement  of  same? 

Yours  very  truly, 

Wardwell  Manufactumng  Co. 

This  suggestion  Is  sufficient  In  most  cases  to  bring  in 
a  remittance.  If  nothing  is  heard  from  the  account  within 
ten  days  from  the  time  the  statement  and  letter  go  out, 
a  second  letter  is  written,  also  enclosing  a  statement  of 
the  account. 

New  York,  June  25,  1913. 
Mr.  Milton  A.  Harlow, 

816  Euclid  Avenue, 

Qeveland,  Ohio. 
Dear  Sir: 

We  enclose  herewith  statement  of  your  account,  which  is  now 
twenty  days  overdue.     We  shall  appreciate  an  immediate  remittance. 

Yours  very  truly, 

Wardwell  Manufacturing  Co. 

If  this  letter  does  not  bring  In  the  desired  remittance, 
ten  days  later — or  sixty  days  from  the  date  of  purchase 
and  thirty  days  after  the  due  date  of  the  account — a  third 


134  THE  ART   OF  COLLECTING 

letter  and  statement  are  sent  to  the  delinquent  customer. 
This  letter  is  concise  and  to  the  point,  and  reads  as 
follows : 


New  York,  July  5,  1913- 
Mr.  Milton  A.  Harlow, 

8j6  Euclid  Avenue, 

Qeveland,  Ohio. 
Dear  Sir: 

As  you  will  note  from  the  enclosed  statement,  your  account  is  now 
thirty  days  overdue.  We  do  not  wish  to  embarrass  you  in  any  way, 
but,  if  your  remittance  is  not  received  by  the  15th  of  this  month,  we 
shall  be  forced  to  place  the  account  in  the  regular  channels  for  col- 
lection. 

Yours  very  truly, 

Wardwell  Manufacturing  Co. 


The  "regular  channels  for  collection"  are  in  this  case 
the  concern's  attorneys. 

The  whole  series  takes  a  very  businesslike  stand  that 
the  money  is  due  and  there  is  no  reason  it  should  not  be 
asked  for,  without  softening  the  request  or  using  equivo- 
cation of  any  kind.  The  general  results  are  satisfactory, 
as  out  of  a  total  business  of  over  $1,000,000  a  year,  the 
average  annual  losses  from  bad  debts  do  not  exceed  $250. 

Illustrative  Letters — Third  Series 

The  following  series  of  collection  letters  does  not 
cloak  nor  conceal  in  any  way  the  fact  that  money  is  due 
and  that  the  concern  wants  it,  any  more  than  do  the  sum- 
mary letters  of  the  preceding  series.  In  this  case,  how- 
ever, most  of  the  customers  are  fairly  well  known  to  the 
house,  and  the  personal  element  is  utilized  to  assist  in 
the  collection.     The  series,  as  will  be  recognized,  would 


LETTERS   FOR   LARGER  ACCOUNTS         135 

not  be  suitable  for  use  in  many  cases,  but  with  a  certain 
class  of  customers  will  be  found  very  effective. 

Detroit,  Mich.,  May  i,  1913. 
Mr.  James  Harris, 

36  Lincoln  Avenue, 

Milwaukee,  Wis. 
Dear  Mr.  Harris: 

Our  manager  recently  made  a  careful  examination  of  accounts  on 
our  books  and  reported  that  the  aggregate  amount  now  outstanding  is 
more  than  we  are  justified  in  carrying.  It  has  therefore  been  deter- 
mined that  all  past-due  accounts  must  be  brought  up  to  date.  A  formal 
notice  to  this  effect  will  be  sent  out  in  a  few  days. 

Knowing  that  you  are  amply  able  to  take  care  of  the  small  balance 
of  $75  past  due  on  your  account,  and  not  wishing  you  to  be  annoyed 
in  any  way  in  the  matter,  I  am  writing  now  to  inquire  if  you  cannot 
mail  us  a  check  for  $75  before  the  loth. 

If  you  can  do  this,  it  will  be  a  personal  favor  to  me,  as  I  am  to 
some  extent  held  responsible  for  the  condition  of  the  accounts,  and  it 
will  keep  your  name  out  of  the  past-due  list  on  our  books. 

Trusting  you  will  make  a  special  effort  in  this  instance,  I  remain 

Yours  very  truly, 

John  H.  Martin, 
Cashier. 

This  letter  is  intended  to  give  the  debtor  the  Impres- 
sion that  the  cashier  is  taking  a  friendly  interest  in  his 
welfare,  and  is  conferring  a  favor  In  notifying  him  of  the 
condition  of  his  account,  so  that  payment  may  be  made 
and  his  credit  be  kept  in  gilt-edge  shape.  It  Is  an  easy, 
friendly  tip;  and  the  most  sensitive  customer  should  not 
take  offense.  At  the  same  time  the  predominant  feature 
is  the  fact  that  payment  Is  desired. 

If  the  first  letter  produces  no  results,  a  second  letter 
follows  at  such  interval  as  may  be  deemed  advisable. 


136  THE  ART  OF  COLLECTING 

Detroit,  Mich.,  May  15,  1913. 
Mr.  James  Harris, 

36  Lincoln  Avenue, 

Milwaukee,  Wis. 
Dear  Sir: 

Your  attention  is  called  to  the  enclosed  statement  of  your  account. 
While  the  amount  is  not  large,  a  remittance  at  the  present  time  will  be 
very  acceptable  to  us,  as  we  have  several  heavy  obligations  coming  due 
on  the  25th  of  the  month,  for  which  we  must  be  prepared. 

Ordinarily  we  should  be  glad  to  extend  you  longer  credit,  Dut  the 
growth  of  our  business  has  been  so  rapid  that  we  need  all  the  cash  we 
can  collect  to  keep  pace  with  its  demands,  and  your  remittance  will 
play  its  part. 

We  shall  therefore  rely  on  receiving  the  balance  due  on  your 
account  not  later  than  the  25th  inst. 

Yours  very  truly, 

Stanley-Howard  Co. 


This  letter  Is  no  stronger  in  itself  than  the  first,  but 
has  the  added  strength  of  coming  direct  from  the  firm. 
The  need  of  ready  cash  is  its  excuse  for  writing,  and  the 
letter  is  in  much  the  same  general  tone  as  the  first  of  the 
series.  It  may,  however,  be  criticized  on  the  ground  that 
it  is  bad  policy  to  disclose  to  customers  the  weakness  of 
your  own  firm — supposing  that  such  a  weakness  does  in 
fact  exist.  This  objection  holds  good  as  a  rule;  but  such 
a  letter  as  the  above  is  intended  for  cases  where  the  debtor 
is  perfectly  familiar  with  the  standing  of  the  firm  to 
which  he  is  indebted,  and  its  object  is  to  get  the  money 
from  him  without  giving  him  offense. 

If  letter  No.  2  does  not  result  in  a  remittance  or  an 
explanation  of  why  a  remittance  is  not  sent,  another  letter 
follows. 


LETTERS   FOR   LARGER  ACCOUNTS         137 

Detroit,  Mich.,  June  i,  1913. 
Mr.  James  Harris, 

36  Lincoln  Avenue, 

Milwaukee,  Wis. 
Dear  Sir: 

Greatly  to  our  surprise,  we  find  it  again  necessary  to  call  your 
attention  to  the  balance  due  on  your  account.  We  feel  that  you  must 
have  overlooked  the  matter,  as  we  know  from  experience  your  usual 
proniptness  of  payment. 

We  wish  to  be  entirely  frank  with  you  and  assure  you  again  that 
it  is  of  the  utmost  importance  that  you  give  this  matter  immediate 
attention.    As  stated  in  our  letter  of  the  15th,  we  need  the  money. 

Remembering  our  pleasant  relations  in  the  past,  we  shall  look  with 
confidence  to  the  receipt  of  your  remittance  on  the  loth  of  this  month. 

Yours  very  truly, 

Stanley-Howard  Co. 

If  this  letter  is  not  followed  by  a  remittance  or  an 
explanation  of  some  kind,  something  is  wrong.  As  will 
be  noted,  the  first  three  letters  are  an  appeal,  not  a  de- 
mand. They  give  the  customer  a  chance  to  "save  his  face," 
if  he  will,  and  settle  up  the  account  without  injury  to  his 
credit  and  with  friendly  feelings  on  both  sides.  If,  how- 
ever, he  pays  no  attention  to  these  courteous  letters,  it  is 
time  to  change  tactics  and  to  state  in  a  straightforward 
and  unequivocal  manner  that  the  account  must  be  settled. 
The  following  letter  does  this : 

Detroit,  Mich.,  June  15,  1913- 
Mr.  James  Harris, 

36  Lincoln  Avenue, 

Milwaukee,  Wis. 
Dear  Sir: 

We  have  written  you  several  times  in  reference  to  your  overdue 
account,  but  have  not  received  the  courtesy  of  a  reply.  We  do  not 
understand  your  silence  in  the  matter  and  must  now  insist  upon  your 
immediate  attention.  We  shall  expect  you  either  to  remit  at  once  or  to 
advise  us  if  there  is  any  reason  why  you  should  not  or  cannot  do  so. 

Yours  very  truly, 

Stanley-Howard  Ca 


138  THE  ART   OF  COLLECTING 

If  this  more  peremptory  letter  does  not  produce  re- 
sults, the  following  letter  may  be  used.  Its  suggestive 
discussion  of  legal  proceedings  is  frequently  effective. 

Detroit,  Mich.,  June  25,  1913. 
Mr.  James  Harris, 

36  Lincoln  Avenue, 

Milwaukee,  Wis. 
Dear  Sir: 

We  are  forced  to  infer  from  your  continued  refusal  to  answer  our 
letters  that  you  would  evade  payment  of  your  indebtedness  to  us  if  you 
could.  You  cannot.  The  amount  is  justly  due  us,  and  merely  because 
we  have  been  so  considerate  you  must  not  imagine  that  we  are  going  to 
let  the  matter  drop,  or  that  you  can  longer  ignore  it. 

You  may  think  that  you  are  beyond  the  reach  of  the  law,  but  this 
is  a  mistake ;  and,  if  you  do  not  remit  or  write  us  at  once,  we  will 
institute  proceedings.  This  will  add  court  costs  to  our  claim,  and,  in 
addition,  involve  you  in  the  injurious  publicity  of  a  suit. 

We  have  no  desire  to  misrepresent  the  matter  in  any  way,  but  we 
really  believe  that  if  you  fully  understood  how  much  this  small  claim 
will  cost  you  if  it  is  collected  by  legal  procedure,  and  the  injury  to 
your  credit  which  will  surely  result,  you  would  forward  the  amount  to 
us  at  once  and  thus  avoid  the  necessity  of  a  suit. 

Yours  very  truly, 

Stanley-Howard  Co. 

If  this  letter  is  ignored,  the  following  "final  notice" 
may  be  used.  Properly  used  it  will  prevent  many  a  law- 
suit. It  is  drawn  up  in  legal  form,  supposedly  by  the  at- 
torney of  the  house,  and  should  be  written  on  legal  paper 
or  on  the  letterhead  of  the  attorney.  It  is  usually  signed 
by  somebody  connected  with  the  concern  whose  name  is 
not  known  to  the  customer.  Sometimes  it  is  signed  with 
the  attorney's  name,  which  must,  of  course,  be  done  only 
with  his  consent.  The  notice,  while  masquerading  as  a 
legal  document,  is  carefully  drawn  to  avoid  the  statement 
of  any  facts  not  absolutely  true,  and,  considering  the  cir- 
cumstances under  which  it  is  used,  can  hardly  be  criticized. 


LETTERS   FOR  LARGER  ACCOUNTS         139 
FINAL  NOTICE  BEFORE  SUIT 


Stanley-Howard  Co., 

PlaintiflF, 
vs. 
James  Harris, 

Defendant. 


State  of  Michigan 
County  of  Wayne. 


'  I  ss. : 


To  James  Harris,  Defendant: 

You  will  now  take  notice  that  the  above-named  plaintiff  claims 
that  you  are  indebted  to  him  in  the  sum  of  $75,  and,  although  duly 
demanded,  the  same  has  not  yet  been  paid  nor  any  part  thereof. 

Now,  THEREFORE,  unless  you  remit,  or  appear  in  person  or  by 
attorney  at  the  offices  of  said  plaintiff,  275  West  Fort  Street,  Detroit, 
Michigan,  in  the  County  and  State  aforesaid,  on  or  before  the  15th 
day  of  July,  A.D.  1913,  at  3  o'clock  in  the  afternoon  of  said  day,  and 
make  payment  to  said  plaintiff  of  said  claim,  with  interest  thereon,  or 
proA-ide  for  the  adjustment  thereof,  suit  will  be  brought  forthwith  for 
the  total  amount  with  interest,  together  with  the  costs  and  disburse- 
ments of  action. 

Dated  at  Detroit  this  5th  day  of  July,  1913. 

Thomas  B.  McClelland, 
For  the  Plaintiff. 

If  this  notice  produces  no  results,  the  matter  had  bet- 
ter be  placed  at  once  in  the  hands  of  an  attorney. 


CHAPTER  Xn 

Collection  Letters  for  Instalment  Accounts 

Handling  Instalment  Accounts 

There  need  be  no  hesitation  in  asking  for  money  due 
on  instalment  accounts.  In  fact  it  should  be  asked  for  as 
pointedly  as  possible,  and,  speaking  generally,  payment 
should  be  insisted  upon  when  payment  is  due.  The  small 
monthly  payments  are  carried  easily  if  collections  are 
close,  but  if  neglected  they  mount  up  rapidly  and  soon 
endanger  the  whole  account. 

Close  collection  for  instalment  accounts  is  not,  how- 
ever, an  invariable  rule.  Each  case  requires  the  exercise 
of  judgment  and  discretion.  Frequently  it  is  most  diffi- 
cult, and  at  times  impossible,  for  the  instalment  purchaser 
to  pay  on  the  due  date,  and,  if  he  is  pushed  too  hard,  the 
last  resort  of  the  instalment  house — the  seizure  of  the 
goods — may  be  reached  before  it  is  really  necessary. 

In  the  consideration  of  instalment  collections  it  must 
be  remembered  that  there  is  much  less  danger  of  final  loss 
on  instalment  purchases  than  is  the  case  in  ordinary  col- 
lections. Such  purchases  are  almost  invariably  made 
under  contracts  of  conditional  sale;  and  the  security  of  the 
purchase  itself  is  behind  them.  For  this  reason  the  col- 
lection manager  of  instalment  accounts  has  much  greater 
freedom  of  discretion  than  is  usually  the  case. 

He  must,  however,  always  remember  that  it  is  bad 
business  to  seize  instalment  goods  if  it  can  possibly  be 

L40 


INSTALMENT  COLLECTION  LETTERS       141 

avoided.  The  house  is  supposedly  in  business  to  make 
money  by  selling  goods,  not  by  forfeiting  payments;  and, 
while  there  may  be  a  profit  to  the  house  in  seizures  after 
material  payments  have  been  made,  the  effect  of  the  prac- 
tice on  other  customers,  and  its  general  unfairness,  will 
inevitably  react  on  and  injure  the  instalment  house.  For 
this,  if  for  no  other  reason,  every  effort  should  be  made 
to  secure  payment,  and  goods  once  sold  should  not  be 
taken  back  save  as  a  last  resort. 

In  the  collection  of  instalment  accounts,  pressure  of 
every  kind  is  brought  upon  the  delinquent  to  enforce  pay- 
ment— far  more  than  in  the  case  of  ordinary  collections. 
This  is  due  to  the  fact  that  from  the  practical  standpoint 
either  the  account  must  be  collected,  or,  where  the  con- 
tract is  forfeitable,  the  goods  be  taken  back;  and  it  is 
bad  business  to  take  the  goods  back.  Appeal,  argument, 
persuasion  and  anything  else  that  may  influence  the  pur- 
chaser are  therefore  resorted  to  before  the  collector 
allows  himself  to  despair  of  success. 

Conditions  of  Instalment  Collections 

In  some  cases  the  instalment  purchaser  tires  of  his 
purchase  and  finds  the  recurring  burden  of  the  payments 
too  onerous  to  carry  for  something  which  he  has  ceased 
to  value.  At  other  times  the  articles  purchased  are  lost, 
stolen  or  destroyed,  and  the  instalment  purchaser  is  quite 
willing  for  the  concern  to  bear  the  loss  if  he  can  shift  it. 
In  other  cases  it  is  a  financial  impossibility  for  the  pur- 
chaser to  make  the  payments.  To  meet  these  varying 
conditions  and  the  many  others  that  arise  in  instalment 
work  requires  much  ability  and  ingenuity  on  the  part  of 
the  collection  manager. 


142  THE  ART  OF  COLLECTING 

Where  the  purchaser  has  tired  of  the  goods,  they  must 
really  be  sold  afresh,  and  this  requires  a  combination  of 
persuasiveness  and  tactful  bullying.  Where  the  purchaser 
is  unable  to  pay,  the  goods  must  either  be  taken  back  or 
the  account  be  carried  over  until  the  party  is  again  in 
funds.  Where  the  goods  have  been  lost,  stolen  or  de- 
stroyed, insistence,  persuasion,  and  a  painting  large  of 
the  possible  results  of  failure  to  pay,  must  be  relied  upon 
to  bring  payments  from  the  reluctant  purchaser. 

There  is  perhaps  in  instalment  work  more  scope  for 
the  exercise  of  tact,  strategy,  a  knowledge  of  human  na- 
ture, skilful  letter-writing,  and  general  ability  than  in  any 
other  line  of  collection. 

Instalment  Notices 

In  the  instalment  business,  notices  of  payments 
coming  due  take  the  place  of  the  statement  of  account  in 
ordinary  lines.  The  notices  which  follow  are  sent  out 
at  such  intervals  as  the  policy  of  the  particular  house 
may  determine.  In  the  examples  given  they  are  sent  at 
intervals  of  a  little  less  than  two  weeks.  The  first  notice 
goes  out  in  advance  of  the  due  date  of  payment,  and  it 
and  the  succeeding  notices  of  the  series  are  numbered  to 
give  them  a  more  formal  appearance. 

Notice  No.  J. 

Chicago,  111.,  May  13,  1913. 
Your  payment  of  $7.50  on  instalment  contract   falls   due   at  this 
office  May  15,  1913. 

Respectfully, 

Chicago  Furniture  House. 
To  John  Wagner, 

156  Chelsea  Street, 

Springfield,  IlL 


INSTALMENT  COLLECTION   LETTERS       143 

If  payment  is  not  made  within  the  next  ten  days,  a 
notice  of  dehnquency  is  sent  as  follows: 

Notice  No.  2. 

Chicago,  111.,  May  24,  1913. 
Your  payment  of  $7.50  on  instalment  contract  fell  due  at  this  office 
May  15,  1913.     Please  send  in  your  payment  at  once. 

Respectfully, 

Chicago  Furniture  House. 
To  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 

If  this  notice  produces  no  effect,  notice  No.  3  goes 
out,  as  follows : 

Notice  No.  3. 

Chicago,  111.,  Juoe  4,  1913. 
Two  notices  have  been  sent  you  in  regard  to  the  payment  due  on 
your  instalment  contract.  These  notices  may  not  have  reached  you. 
We  therefore  send  you  this  present  formal  notice  that  your  payment  of 
$7.50  fell  due  May  15,  1913,  and  is  now  unpaid.  Please  give  this  your 
prompt  attention. 

Respectfully, 

Chicago  Furniture  House. 
To  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 

If  no  attention  is  paid  to  these  notices,  it  is  time  to 
place  the  matter — if  a  city  collection — in  the  hands  of  a 
collector.  If  an  outside  collection,  the  matter  must  be  fol- 
lowed up  by  means  of  letters. 

Instalment  Collection  Letters 

The  following  letters  take  up  the  preceding  account 
at  the  point  to  which  it  was  carried  by  the  statements. 
The  first  letter  is  sent  about  the  15th  of  the  month,  when 
a  second  payment  is  coming  due. 


144  THE  ART  OF  COLLECTING 

Chicago,  III.,  June  15,  1913. 
Mr.  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 
Dear  Sir: 

In  looking  over  the  accounts  on  our  books,  I  find  that  two  pay- 
ments of  $7.50  each — $15  in  all — are  now  due  and  payable  on  your 
account  with  us  for  furniture.  In  view  of  the  very  liberal  terms  of 
payment  extended  to  you  in  this  matter,  I  must  insist  upon  your 
monthly  payments  being  made  regularly.  When  I  tell  you  that  we 
have  nearly  10,000  such  accounts  on  our  books,  you  will  readily  appre- 
ciate the  enormous  amount  tied  up  in  this  manner,  and  the  importance 
of  payments  being  made  promptly. 

Your  monthly  payments  of  $7.50  each  are  very  small  compared 
with  the  total  of  your  account,  and  we  are  not  unreasonable  in  insisting 
upon  its  payment  in  accordance  with  your  agreement. 

Within  the  next  few  days  I  shall  expect  to  receive  your  remittance 
covering  the  balance  of  $15  due  to  date.  I  trust  that  hereafter  your 
payments  will  be  made  as  they  become  due. 

Yours  very  truly, 

Henry  Alston, 
Manager  Collection  Dept. 

If  a  remittance  is  not  received,  this  letter  is  followed 
in  due  time  by  a  second,  as  follows : 

Chicago,  III.,  June  25.  19x3. 
Mr.  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 
Dear  Sir: 

Some  ten  days  since  I  wrote  you  in  regard  to  payments  now  due 
on  your  account,  amounting  to  $15.  I  regret  to  find  that  you  have 
completely  ignored  this  letter,  and  I  am  writing  now  to  find  out  why 
this  is  so,  and  also  to  remind  you  that  we  cannot  carry  your  account 
on  the  books  indefinitely. 

We  have  been  very  lenient  with  you  in  this  matter,  and  we  now 
feel  that  the  time  has  come  to  insist  upon  the  settlement  of  all  overdue 
payments.  We  shall  expect  you  to  arrange  for  this  at  once  and  shall 
look  for  your  remittance  by  return  mail. 

The  matter  must  receive  your  immediate  attention. 

Yours  very  truly, 

Henry  Alston, 
Manager  Collection  Dept 


INSTALMENT  COLLECTION   LETTERS       145 

If  this  letter  does  not  bring  a  reply  of  some  kind,  the 
following  letter  may  be  more  effective: 

Chicago,  111.,  July  5,  1913. 
Mr.  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 
Dear  Sir: 

I  have  written  you  twice  in  reference  to  the  overdue  payments  on 
your  account,  amounting  to  $15.  You  have  ignored  my  letters  and  you 
have  not  made  any  provision  for  your  indebtedness.  I  must  now  insist 
on  immediate  settlement  of  the  account  to  date. 

Unless  you  forward  your  check  by  return  mail  for  amount  now 
due  and  payable,  or  otherwise  write  us  fixing  a  definite  date  when  you 
can  remit,  we  shall  draw  upon  you  at  sight  for  the  amount  due  us. 

Yours  very  truly, 

Henry  Alston, 
Manager  Collection  Dept. 

If  no  response  is  received  to  this  letter,  a  draft  should 
be  drawn.  A  letter  may  be  sent  at  this  time  notifying 
the  purchaser  that  this  has  been  done.  This  letter  is  not, 
however,  strictly  necessary,  and  should  only  be  used  where 
it  will  help  to  secure  payment  of  the  draft. 

If  the  draft  is  returned  unpaid  and  without  explana- 
tion of  why  it  Is  not  paid,  the  following  letter  may  be  used : 

Chicago,  IlL,  July  15,  1913. 
Mr.  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 
Dear  Sir: 

Please  take  notice  that  our  draft,  drawn  upon  you  through  the 
Hamilton  National  Bank  for  the  amount  of  $15,  has  been  returned  to 
us  dishonored. 

This  draft  was  drawn  upon  you  for  money  due  us  on  account  of 
furniture — furniture  which  you  have  had  and  now  have  and  are  using 
daily.  Is  it  courteous  to  ignore  our  draft  and  our  letters,  as  you  have 
done?  Is  it  fair  or  honorable  to  keep  from  us  money  which  is  ours — 
money  which  is  due — money  for  which  you  have  had  value  received? 

I  do  not  like  to  proceed  to  extremes  in  the  matter.  I  do  not 
believe  it  would  be  necessary  if  you  really  appreciated   the  fact  that 


146  THE  ART   OF   COLLECTING 

you  are  keeping  from  us  something  that  is  ours.  There  is  now  due 
$22.50.  Why  not  send  us  a  check  for  the  amount  and  clean  the 
matter  up? 

Do  not  let  the  matter  drag.  Write  me  to-day  and  let  me  know 
exactly  what  you  can  do. 

Yours  very  truly, 

Henry  Alston, 
Manager  Collection  Dept. 

If  the  purchaser  pays  no  attention  to  this  letter,  the 
matter  is  one  for  serious  consideration.  Shall  the  goods 
be  recovered,  or  shall  continued  efforts  be  made  for  col- 
lection? If  it  is  decided  that  the  goods  had  better  be 
recovered,  the  following  "last  chance"  letter  may  be  used: 

Chicago,  111.,  July  20,  1913. 
Mr.  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 
Dear  Sir: 

I  have  as  yet  received  no  reply  to  my  letter  of  the  15th,  and  must 
therefore  again  call  attention  to  the  very  unsatisfactory  condition  of 
your  account. 

Your  monthly  payments  and  the  terms  of  your  lease  were  made 
exceptionally  easy.  Notwithstanding  this,  we  find  you  are  at  the 
present  time  $22.50  in  arrears  and  you  have  paid  no  attention  to  our 
letters  requesting  payment. 

In  view  of  the  foregoing  facts,  we  are  forced  to  notify  you  that 
unless  you  pay  the  amount  now  overdue  on  your  contract  on  or  before 
July  25,  1913,  or  otherwise  call  in  before  that  date,  we  shall  conclude 
that  you  are  unable  to  pay  for  the  furniture  and  shall  send  for  the 
same. 

It  is  important  that  you  give  the  matter  your  immediate  attention. 

Yours  very  truly, 

Henry  Alston, 
Manager  Collection  Dept. 

If  this  letter  produces  no  result,  it  is  time  for  action. 
When  the  goods  are  in  the  same  city,  a  driver  should  be 
sent  round  with  an  order  for  the  goods,  and  instructions 
to  secure  them  if  possible.     If  the  purchaser  surrenders 


INSTALMENT  COLLECTION   LETTERS        147 

the  goods,  they  are  brought  back  and  put  Into  stock  for 
resale,  and  the  transaction  Is  closed.  If,  however,  the 
purchaser  refuses  to  give  them  up,  a  collector  should  call 
and  serve  a  written  demand  on  the  customer  for  the  re- 
turn of  the  goods,  and  get  possession  of  them  If  he  can. 
If  the  goods  are  outside  of  the  city,  this  written  demand 
for  them  may  be  sent  by  registered  mall,  or  It  may  be 
placed  In  the  hands  of  a  local  attorney,  who  will  serve  It, 
and  secure  possession  of  the  goods. 

The  written  demand  is  effective  in  many  cases  which 
are  not  responsive  to  any  other  appeal  or  argument,  and 
either  brings  the  customer  to  the  store  or  secures  the  re- 
turn of  the  goods.  A  form  of  written  demand  Is  as 
follows : 

To  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 
Formal  demand  is  hereby  made  on  you  for  the  return  to  us  of 
(description  of  furniture  or  other  goods  follows  here)  now  in  your 
possession  and  belonging  to  us,  on  account  of  the  non-payment  of  the 
amount  due  on  your  contract  for  the  purchase  thereof,  and  because  of 
your  non-compliance  with  the  terms  and  conditions  of  the  contract 
concerning  the  same,  and  you  are  hereby  requested  and  directed  to 
deliver  the  said  furniture  to  the  bearer  hereof  for  our  account. 
Chicago,  111.,  Chicago  Furniture  House, 

By  Henry  Alston, 
July  25,    1913.  Manager  Collection  Dept. 

The  goods  are,  of  course,  taken  back  only  where  the 
account  is  uncollectible  and  it  is  considered  better  to  have 
the  goods  than  the  outstanding  account.  Where  It  is  be- 
lieved that  the  account  can  be  collected,  or  where  for  other 
reasons  it  is  not  desirable  to  take  possession  of  the  goods, 
the  "demand  for  return  of  goods"  and  the  preceding 
letter  would  be  replaced  by  the  following  letter: 


148  THE  ART  OF  COLLECTING 

Chicago,  111.,  July  25,  1913. 
Mr.  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 
Dear  Sir: 

I  am  surprised  and  disappointed  that  you  have  paid  no  attention 
to  my  draft  or  my  letters.  Payments  aggregating  $22.50  are  now  due, 
and  I  must  insist  on  an  immediate  settlement  of  same.  By  promptly 
complying  with  this  request — which  you  must  admit  is  reasonable — you 
will  be  saved  expense  and  embarrassment  and  obviate  the  disagreeable 
necessity  on  our  part  of  adopting  legal  measures  to  secure  payment. 
Anticipating  your  prompt  response,  I  remain 

Yours  very  truly, 

Henry  Alston, 
Manager  Collection  Dept. 

If  for  the  sake  of  effect  a  more  discursive  letter  is 
desired,  the  following  form  may  be  used: 

Chicago,  111.,  July  25,  1913. 
Mr.  John  Wagner, 

156  Chelsea  Street, 

Springfield,  111. 
Dear  Sir: 

You  have  seen  fit  to  ignore  our  draft  and  our  letters.  The  draft, 
as  I  wrote  you,  was  returned  unpaid,  and  the  costs  of  presentation 
have  been  added  to  your  indebtedness. 

We  dislike  to  involve  you  in  further  costs  and  embarrassment,  but 
your  own  neglect  of  the  matter  leaves  us  no  alternative,  and  we  are 
obliged  to  advise  you  that  unless  you  remit  at  once  the  sum  of  $22.50 
to  cover  the  payments  now  overdue  on  your  account,  we  shall  bring 
suit  against  you  to  secure  our  claim. 

Bear  in  mind  that  if  this  is  done,  the  resulting  costs,  which  must 
be  paid  by  you,  and  the  trouble  and  embarrassment  which  will  be 
suffered  by  you,  are  entirely  due  to  your  failure  to  fulfill  an  agreement 
which  was  entered  into  in  good  faith. 

Yours  very  truly, 

Henry  Alston, 
Manager  Collection  DepL 

If  the  letter  suggesting  legal  procedure  is  ineffective, 
a  follow-up  letter,  either  fixing  a  date  when  legal  pro- 
ceedings will  be  begun,  or  elaborating  more  fully  on  the 


INSTALMENT  COLLECTION   LETTERS        149 

expenses  and  trouble  incident  to  suit,  may  produce  re- 
sults. The  following  letters  are  of  this  nature.  The 
proper  one  to  be  used  is  a  matter  of  discretion. 

Dear  Sir: 

Having  received  no  reply  to  our  recent  letter,  we  are  forced  to 
believe  that  we  must  proceed  to  extreme  measures  for  the  collection  of 
the  money  you  owe  us.  Now,  therefore,  take  notice  that,  unless  we 
receive  the  sum  of  $22.50 — the  amount  now  due  us — on  or  before  the 
loth  of  the  month,  we  shall  place  the  account  in  the  hands  of  our 
attorney  in  your  city  for  collection. 

If  we  are  obliged  to  resort  to  legal  measures  to  effect  the  settle- 
ment, you  need  expect  no  further  consideration  or  leniency  of  any  kind. 

We  await  your  action. 

Yours   very   truly, 


Dear  Sir: 

Although  you  have  ignored  our  recent  letters  and  refused  our 
draft,  we  wish  to  give  you  one  more  opportunity  to  settle  your  account 
before  we  proceed  to  extreme  legal  measures. 

Do  you  appreciate  how  much  discredit  and  dishonor  falls  upon 
anyone  who  must  be  forced  to  meet  his  legitimate  business  obligations 
by  a  court  decision? 

Do  you  know  how  much  his  standing  and  responsibility  in  his 
community  is  impaired? 

Do  you  realize  how  injurious  a  judgment  is,  both  from  a  business 
and  a  personal  standpoint?  Your  credit  will  be  impaired.  You  will 
find  it  difficult  to  get  a  position  of  responsibility,  and  impossible  to 
get  a  bond  from  a  bonding  company  if  you  do. 

For  these  reasons  we  sincerely  trust  you  will  settle  your  account 
without  this  discrediting  and  disastrous  publicity, 

If,  however,  you  continue  to  disregard  the  obligations  of  your 
contract,  there  can  be  no  alternative.  We  will  allow  you  ten  days' 
time  In  which  to  make  your  choice  and  advise  us  of  your  decision.  If 
we  do  not  hear  from  you  within  that  time,  your  claim  must  pass 
through  the  regular  channels. 

Yours  very  truly, 


The  next  letter,  making  a  final  appeal  to  the  debtor, 
is  registered.  This  gives  added  weight  to  the  letter,  and 
also  determines  beyond  doubt  its  receipt  by  the  debtor. 


I50  THE  ART   OF  COLLECTING 

Dear  Sir: 

We  are  forced  to  the  conclusion  that  you  will  not  voluntarily  pay 
us  the  amount  clue  on  your  contract.  We  therefore  give  you  formal 
notice  that,  unless  we  hear  from  you  within  fifteen  days  from  the  date 
hereof,  we  will  instruct  our  attorney  in  your  city  to  bring  suit  for  the 

balance  of  our  claim,  amounting  to  $ . 

Yours  very  truly, 


Non-Forfeitable  Contracts 

The  preceding  letters  are  for  the  most  part  equally 
applicable  to  forfeitable  or  non-forfeitable  instalment 
contracts.  If  the  contract  is  forfeitable,  the  next  step 
would  be  either  to  declare  the  contract  forfeited  and  take 
possession  of  the  goods,  or  else,  where  the  amount  and 
the  conditions  justify,  to  place  it  in  the  hands  of  a  col- 
lector for  personal  treatment.  Under  a  non-forfeitable 
contract,  or  a  contract  In  which  the  consideration  received 
by  the  purchaser  cannot  be  taken  from  him,  or  where  the 
consideration  is  of  such  a  nature  that  It  Is  not  advisable 
to  take  it  from  him,  other  methods  must  be  adopted. 

The  following  letters,  which  have  proved  very  ef- 
fective In  practice,  may  be  adapted  to  any  non-forfeitable 
contract : 

Warfield  Correspondence  Schools, 
i8s  Seneca  Avenue. 

Detroit,  Mich.,  June  i,  1913. 
Mr.  Henry  P.  Wilson, 

67  Front  Street, 

Milwaukee,  Wis. 
Dear  Sir: 

You  have  already  received  formal  notice  of  suit  which  we  are 
about  to  bring  against  you  through  our  attorney  at  Milwaukee.  This 
suit,  calling  for  the  amount  due  as  per  the  enclosed  statement,  is  based 
upon  a  definite  contract  entered  into  in  good  faith — a  contract  which 
has  been  fulfilled  on  our  part  to  the  letter,  in  issuing  you  a  guaranteed, 
non-forfeitable  scholarship,  in  supplying  you  with  lessons  and  instruc- 


INSTALMENT  COLLECTION   LETTERS        151 

dons  for  a  considerable  portion  of  the  course,  and  in  holding  ourselves 
ready  at  any  time  to  supply  you  with  the  unconsumed  balance. 

We  regret  that  we  have  been  compelled  to  take  this  action,  and 
firmly  believe  that  if  you  realized  what  it  means  to  you — court  costs, 
the  loss  of  time,  inconvenience,  discredit  and  financial  embarrassment — 
you  would  make  some  arrangement  for  a  friendly  settlement. 

If  necessary,  we  will  agree  to  some  adjustment  of  the  payments 
that  will  make  them  easier  for  you,  but  we  must  insist  upon  something 
being  done  at  once.  If  we  hear  from  you  by  return  mail  with  any 
reasonable  suggestions  as  to  payment,  we  will  instruct  our  attorney  to 
withhold  suit  until  the  matter  can  be  adjusted,  but,  if  otherwise,  our 
instructions  are  to  proceed  at  once. 

Yours  very  truly, 

John  H.  Manson, 

Collection  Manager. 

If  this  letter  produces  no  results,  the  following  official 
letter  may  be  tried  before  suit  is  begun: 

Warfield  Correspondence  Schools, 
185  Seneca  Avenue. 

Detroit,  Mich.,  June  11,  1913. 
Mr.  Henry  P.  WmsoN, 

67  Front  Street, 

Milwaukee,  Wis. 
Dear  Str: 

Mr.  Manson,  our  collection  manager,  has  just  called  my  attention 
to  your  account  showing  a  balance  of  $24  due  us,  and  has  also  handed 
me  copies  of  his  recent  letters. 

I  will  frankly  admit  that  Mr.  Manson  has  been  rather  urgent  in  his 
appeals  to  you  for  payment,  and  I  am  therefore  writing  you  personally 
before  I  allow  our  attorney  to  commence  action. 

Can  we  not  arrange  matters  on  a  friendly  basis — say  a  payment 
of  $3  a  month  until  the  balance  against  you  is  liquidated?  I  realize 
that  it  might  inconvenience  you  to  pay  the  whole  amount  at  once,  but 
ihis  small  monthly  payment  could  hardly  em.barrass  you. 

Please  write  me  personally,  stating  what  amount  you  will  pay 
per  month  and  upon  what  date,  so  that  I  can  give  proper  instructions 
to  our  collection  department. 

I  trust  you  will  write  me  at  once. 

Sincerely  yours, 

Henry  Warfield, 

President. 


152  THE  ART   OF  COLLECTIx\G 

Where  an  instalment  purchaser  replies,  no  matter 
what  the  tenor  of  his  response,  there  is  always  hope  for 
the  account.  If  the  account  has  not  been  paid  because  of 
some  fault  on  the  part  of  the  instalment  concern,  the 
trouble  should  be  promptly  adjusted.  If  something  else 
is  wrong,  the  method  of  attack  must  be  determined  by 
the  conditions. 

If  an  instalment  purchaser  pays  no  attention  to  cor- 
respondence, to  drafts,  to  threats  of  legal  procedure, 
there  is  but  little  more  to  be  done  unless  the  account  can 
be  placed  in  the  hands  of  a  collector  for  personal  effort. 
If  this  is  not  feasible,  a  seizure  of  the  property,  or,  in 
case  of  non-forfeitable  contract,  suit,  is  practically  the 
only  alternative. 


CHAPTER  XIII 
Collection  Letters  for  Professional  Accounts 

Professional  Credits 

The  accounts  considered  in  this  chapter  are  those  of 
the  doctor,  the  lawyer,  and  other  callings  in  which  similar 
conditions  are  found. 

The  lawyer  is  supposed  to  extend  credit  on  a  purely 
business  basis.  He  may  charge  cash  in  advance,  or  may 
absolutely  refuse  to  undertake  a  cause.  He  is  usually 
under  no  compulsion  to  extend  credit.  His  collection 
problems  are  therefore  comparatively  simple.  The  phy- 
sician, on  the  other  hand,  cannot,  speaking  generally,  re- 
fuse calls  for  professional  assistance.  If  men  are  sick 
or  wounded,  it  is  his  duty  to  relieve  their  sufferings  as  far 
as  it  is  within  his  power;  and  the  financial  consideration 
is  supposed  to  be  secondary.  Professional  ethics  do  not 
always  carry  the  physician  as  far  as  this,  but  it  is  a  fact 
that  the  question  of  credits  is  largely  beyond  his  control. 
His  collection  problems  are,  as  a  natural  result,  difficult 
and  troublesome. 

Physicians*  Accounts 

Extending  credit  so  freely  as  he  does,  the  physician 
must  necessarily  accumulate  many  bad  accounts — accounts 
that  are  absolutely  uncollectible  and  really  might  as  well 
be  written  off  the  books  before  they  are  brought  on.  He 
also  brings  many  poor  accounts  on  to  his  books  from  which 

153 


154  THE  ART  OF  COLLECTING 

something  may  be  derived  by  careful  watching,  but  which 
rarely  if  ever  yield  their  face  value.  Many  other  accounts 
are  worth  their  full  value  if  they  are  properly  taken  care 
of,  and  still  others — for  the  solace  of  the  physician — are 
gilt-edge  accounts  upon  which  he  can  depend  almost  as 
absolutely  as  if  the  cash  were  in  his  hands. 

The  fact  that  the  physician's  patients  are  his  friends 
adds  to  the  perplexities  of  his  collections.  He  knows 
each  one  of  his  patients — usually  more  or  less  intimately — 
and  it  is  difficult,  if  not  impossible,  for  him  to  press  these 
friends  for  payment  as  he  might  if  they  were  strangers. 

Also,  the  importance  of  keeping  his  "customers"  is 
greater  for  the  physician  than  for  the  tradesman.  The 
physician  cannot  advertise  as  the  tradesman  does.  It  is 
a  slow  and  painful  process  to  build  up  his  practice,  and 
every  patient  gained  is  a  continuing,  and  usually  a  con- 
siderable, asset.  The  loss  of  even  a  single  good  patient 
is  therefore  somewhat  in  the  nature  of  a  calamity;  and 
the  physician's  clientele  must  be  handled  tenderly. 

Because  of  these  conditions,  and  because  physicians 
are  frequently  unbusinesslike  in  their  habits,  their  col- 
lections are  apt  to  lag.  Accounts  ordinarily  run  for 
months  and  not  Infrequently  for  years — sometimes,  in- 
deed, for  many  years — before  they  are  actually  settled  up. 
Whether  this  somewhat  extreme  indulgence  is  really 
necessary  is  for  the  physician  to  judge.  He  knows  the 
financial  condition  of  his  patients,  knows  how  strong  his 
hold  is  upon  them,  knows  what  they  can  and  should  pay; 
and,  if  he  does  not  get  what  is  coming  to  him,  it  Is  his 
own  fault. 

Just  how  closely  the  physician  should  collect  and  just 
how  direct  his  requests  for  money  should  be,  is  for  the 


COLLECTION  LETTERS— PROFESSIONAL     155 

Individual  to  decide.  Where  a  doctor  stands  high  and 
has  a  strong  hold  on  his  patients,  he  may  collect  as  closely 
as  he  chooses,  and,  as  soon  as  his  patients  become  accus- 
tomed to  his  methods,  they  will  fall  in  line  without  a  mur- 
mur. It  is  but  seldom,  however,  that  the  physician  adopts 
the  practice  of  close  collections. 

Collection  methods  in  the  country  and  city  will,  of 
necessity,  differ.  The  country  doctor  depends  largely 
upon  personal  collection  of  his  accounts.  In  his  rounds 
it  is  a  simple  matter  for  him  to  ask  the  head  of  the  house- 
hold— or  whoever  holds  the  purse-strings — in  a  friendly 
way  that  cannot  possibly  give  offense,  if  something  can- 
not be  paid  on  account,  citing  any  one  of  a  dozen  reasons 
to  soften  the  request  and  make  it  seem  an  entirely  in- 
cidental matter.  If  the  patients  are  able  to  pay,  it  is 
difficult  for  them  to  refuse;  and  in  such  cases  they  usually 
pay — with  as  good  grace  as  may  be — the  smallest  amount 
they  think  the  proprieties  will  permit. 

With  the  city  doctor,  and  those  of  the  larger  towns, 
personal  collections  are  not  always  feasible;  and  it  is  here 
that  the  statement  and  the  collection  letter  are  more  im- 
portant and  more  frequently  used. 

Physicians  in  the  larger  cities  usually  render  monthly 
bills.  In  the  country  they  frequently  render  bills  only 
when  they  need  money.  Between  times  both  creditor  and 
debtor  rock  along  in  the  friendliest  fashion  without  the 
question  of  money  coming  up  at  all. 

Where  collections  are  not  made  personally,  the  state- 
ment is  the  physician's  mainstay.  With  good  customers 
these  go  out  month  after  month  without  comment,  save 
perhaps  an  occasional  mild  endorsement  on  the  bill, 
"Please  Remit."     Patients  who  are  good  pay  send  in  at 


156  THE  ART  OF  COLLECTING 

their  convenience.  They  may  take  their  time  to  send  in, 
but  they  do  send  in.  Others  who  are  good,  or  fairly  good, 
are  frequently  careless  and  need  some  little  urging. 

In  the  physician's  collection  letter  the  personal  ele- 
ment enters  largely.  His  patients,  as  stated,  are  usually 
his  friends,  and  he  cannot  write  them  as  otherwise  he 
might  do.  On  the  other  hand,  while  he  cannot  usually 
press  for  payment,  his  letters  are  apt  to  be  much  more 
effective  than  those  of  the  business  man,  because  of  the 
personal  relations  of  doctor  and  patient.  The  patient 
may  give  no  attention  to  the  doctor's  first  letter  requesting 
payment — in  fact,  he  may  let  several  such  letters  pass  by 
unheeded.  There  is,  however,  always  latent  in  his  mind 
the  conviction  that  at  some  future  time  he  may  need  the 
doctor  again  and  need  him  badly;  and  sooner  or  later  this 
results  in  a  payment.  The  patient  who  can  completely 
ignore  his  doctor's  collection  letters  and  then  come  to  him 
again  for  professional  treatment  without  payment  or 
promise  of  payment,  must  be  a  hard  case  indeed. 

In  the  ordinary  collection  letter  it  is  frequently  inad- 
visable to  plead  the  need  of  money  as  a  reason  for  asking 
payment.  The  physician  need  not  hesitate  to  allege  this 
condition.  Professional  men  are — or  used  to  be  before 
the  present  high  cost  of  living  obtained — proverbially 
impecunious.  Also,  from  the  patient's  point  of  view,  it 
makes  but  little  difference — save  in  fashionable  circles — 
whether  his  doctor  is  financially  "well  fixed"  or  the  re- 
verse. The  prime  requisite  is  professional  ability,  and 
so  long  as  the  doctor  can  cure  his  physical  ailments,  the 
patient  does  not  care  whether  he  comes  for  the  purpose  in 
an  automobile,  in  a  "one-horse  shay,"  or  afoot.  There- 
fore,   the    need    of    money — which    is    the    most    con- 


COLLECTION  LETTERS— PROFESSIONAL     157 

venlent  excuse  for  asking  payment — is  freely  open  to  the 
physician. 

The  following  letters  are  adapted  for  an  account  that 
is  not  much  overdue : 

Louisville,  Ky.,  June  i,  1913- 
Mr.  Robert  L.  Montfort, 

318  Seventh  Street, 

Louisville,  Ky. 
Dear  Mr.  Mont  fori: 

My  monthly  bills  fall  due  tomorrow  and  are  unusually  heavy.  I 
find  I  am  a  little  short  on  the  amount  required  to  meet  them.  Can  you 
let  me  have  $25,  to  reach  me  not  later  than  tomorrow?  If  so,  I  shall 
greatly  appreciate  your  kindness.  Yours  very  truly, 

John  H.  Morton. 

Another  form  of  letter  is  as  follows: 

Dear  Mr.  Harris: 

As  you  probably  know,  I  am  always  short  of  money,  but  I  find 
myself  a  little  unusually  hard  pressed  just  at  present.  Can  you  let  me 
have  $25  or  $30  on  account?  If  so,  it  will  help  me  out  nicely  and  J. 
shall  appreciate  your  kindness. 

Yours  very  truly, 


In  the  following  letter  the  request  for  money  is  made 
a  little  more  pointedly: 

Dear  Mr.  French: 

Can  you  let  me  have  $25  or  $30  on  account?     I  am,  as  usual,  in 
need  of  money  and  have  to  look  to  my  friends  for  help. 

Yours  very  truly, 


Another  form  is  given  below: 

Dear  Mr.  Willis: 

I  am  badly  in  need  of  money.  Can  you  let  me  have  $25  or  $30  on 
account  not  later  than  tomorrow?  An  answer  by  bearer  will  be 
greatly  appreciated.  Yours  very  truly. 


158  THE  ART  OF  COLLECTING 

A  more  picturesque  letter  is  as  follows: 

I') ear  Mr.  Howland: 

I  am  apprehensive  of  trouble  and  turn  to  you  for  help.  My  wife 
has  purchased  a  new  spring  outfit  and  the  bill  comes  in  tomorrow ; 
and,  with  the  inconsequential  financial  recklessness  of  the  sex,  she  has 
promised  it  will  be  paid  at  once.  She  says  this  is  economical  because 
she  secured  a  material  reduction  for  cash.  This  may  be  true,  but  it 
leaves  me  to  meet  the  bill.     Can  you  help  me  out? 

A  check  for  $25  or  $30  would  be  a  "very  present  help  in  time  of 
trouble." 


Another  form  of  letter  is  as  follows : 

Dear  Mrs.  Farnsworth: 

Unless  my  exchequer  is  replenished  very  shortly,  the  "bairns"  will 
be  going  barefoot,  not  to  mention  more  direful  possibilities.  Can  you 
relieve  my  necessities?  Twenty-five  or  thirty  dollars  could  not  be 
better  applied.  Yours  very  sincerely, 


Other  forms  follow: 

Dear  Mr.  Clark: 

I  am  unexpectedly  called  to  Cincinnati  for  a  consultation  and  find 
myself  a  little  short  of  funds.  Can  you  let  me  have  $50  on  account? 
If  so,  please  send  it  to  me  by  bearer  and  greatly  oblige 

Yours  very  truly, 


Dear  Mrs.  Wilson: 

I  wonder  if  you  cannot  let  me  have  $35  or  $40  on  account.  I  have 
some  very  heavy  bills  to  meet  within  the  next  few  days,  and  it  is 
going  to  tax  my  resources  to  raise  the  money.  For  this  reason  I  shall 
appreciate  a  remittance  greatly. 

Yours  very  truly, 


Dear  Mrs.  Johnson: 

The  butcher,  the  baker,  the  candlestick  maker  and  several  other 
individuals  of  similar  tendencies  are  after  me  with  bills,  and  I  lack 
the  wherewithal  to  silence  their  importunities.  Can  you  let  me  have 
$75  or  $80  on  account?  If  you  will  do  this,  it  will  be  an  appreciated 
kindness.  Yours  very  truly, 


COLLECTION  LETTERS— PROFESSIONAL     159 

Dear  Mrs.  Hughes: 

As  you  know,  I  am  chronically  hard  up,  but  at  the  present  time  I 
am  a  little  harder  up  than  usual.  Can  you  not  make  a  payment  of  $25 
or  $30  on  account?    If  you  can,  it  will  be  quite  a  help. 

Yours  very  truly, 


Dear  Mrs.  Brooks: 

You  were  kind  enough  to  let  me  have  a  payment  on  account  last 
month,  and  I  should  not  come  to  you  again  so  soon  were  it  not  for  a 
recent  disaster  at  our  house — not  remotely  connected  with  our  dining- 
room  maid  and  Mrs.  Warfield's  best  dinner-set — which  is  too  much  for 
the  present  condition  of  my  exchequer.  Even  a  small  remittance  will 
be  appreciated,  and  I  sincerely  trust  you  can  come  to  my  relief. 

Very  sincerely, 


When  letters  such  as  these  fail  to  produce  results,  the 
matter  becomes  puzzling.  A  doctor  does  not  wish  to 
offend  his  patients,  nor  does  he  wish  to  lose  his  money,  nor 
to  wait  for  it  indefinitely.  On  the  other  hand,  it  is  ob- 
vious that  a  patient  who  does  not  pay  at  all  is  not  worth 
keeping,  and  the  sooner  he  is  offended  and  transfers  his 
unlucrative  practice  to  some  other  physician,  the  better. 
As  long,  however,  as  there  is  hope  of  financial  return, 
the  patient  is  to  be  handled  carefully.  The  following  let- 
ters, while  somewhat  more  urgent  than  those  already 
given,  should  not  be  offensive : 

LoxnsviLLE,  Ky.,  July  2,  1913. 
Mr.  Robert  L.  Montfort, 

316  Seventh  Street, 

Louisville,  Ky. 
Dear  Mr.  Montfort: 

The  last  time  I  needed  money  I  asked  you  to  help  me  out,  but  you 
were,  I  presume,  unable  to  do  so  at  that  time.  I  have  struck  another 
hard  place  and  come  to  you  again.  Can  you  let  me  have  $30  to  tide 
over?     If  so,  you  will  be  a  friend  indeed. 

Yours  very  truly. 


i6o  THE  ART   OF   COLLECTING 

Dear  Mr.  Harris: 

I  am  badly  in  need  of  money,  and  in  looking  over  my  accounts  I 
see  you  have  not  made  me  a  payment  for  a  very  considerable  period. 
Can  you  not  let  me  have  $25  or  $30  within  the  next  day  or  two?  If 
you  can,  it  will  be  quite  an  accommodation. 

Yours  very  truly, 


Dear  Mr.  Alexander: 

I  am  sorry  to  come  to  you  again  for  money,  but  you  will  remember 
the  last  time  I  wrote  you  were  unable  t©  pay  anything  on  account,  and 
I  am  therefore  hoping  that  you  will  be  able  to  do  something  now. 
Please  drop  me  a  note  and  let  me  know  what  you  can  do,  or,  better 
still,  send  me  a  check.  Yours  very  truly, 


My  Dear  Mr.  Jones: 

I  wrote  you  a  month  or  two  ago  to  see  if  you  could  not  make  me 
a  payment  on  accotmt,  but  the  markets  were  then  going  the  wrong 
way  and  you  were  unable  to  come  to  my  assistance  I  am  again  in 
"straitened  circumstances,"  but  this  time  am  glad  to  note  that  the 
markets  are  buoyant.  Can  you  square  up  with  me  to  the  extent  of 
$75,  or  even  $50  if  the  wave  of  prosperity  has  not  really  reached  you 
yet?     It  is  a  case  where  every  little  helps. 

Yours  very  truly, 


Dear  Mrs.  Andrews: 

When  I  wrote  you  last  month  for  a  payment  on  account,  you  said 
you  would  certainly  let  me  have  $30  or  $40  this  month.  When  may  I 
expect  your  check?  I  have  several  obligations  coming  due  within  the 
next  few  days  and  should  be  glad  to  have  your  remittance,  if  possible, 
to  help  meet  them.  Yours  very  truly, 


Dear  Mr.  Rollins: 

When  I  wrote  you  in  January  you  were  unable  to  let  me  have  a 
payment  on  account,  but  thought  you  could  within  a  month  or  two.  1 
sincerely  trust  you  are  now  in  a  position  to  do  this,  as  a  remittance 
could  not  come  in  at  a  better  time. 

Can  you  not  let  me  have  a  check  for  the  amount  due — $70? 

Yours  very  truly, 


COLLECTION  LETTERS— PROFESSIONAL     16 1 

Dear  Mrs.  French: 

I  dislike  to  annoy  you  by  repeated  requests  for  money,  but,  as  you 
know,  the  demands  on  a  physician  are  many  and  cannot  be  avoided. 
I  should,  therefore,  greatly  appreciate  a  remittance.  Even  so  small  an 
amount  as  $40  would  be  very  acceptable. 

Yours  very  truly, 


Dear  Mrs.  Wiison: 

I  am  again  needing  money  and  c»me  to  you  for  help.  Would  it 
be  too  much  of  a  strain  for  you  to  pay  the  entire  balance  now  due — 
$65?  I  should  like  to  get  this  full  amount  if  you  can  possibly  spare  it, 
but,  if  not,  send  what  you  can. 

Yours  very  truly, 


Dear  Madam: 

It  is  always  unpleasant  to  ask  for  money,  and  I  am  sorry  to  write 
you  again,  but  have  heard  nothing  from  my  last  letter.  The  balance  on 
your  account  is  small.  Can  you  not  send  me  a  check  for  the  entire 
amount?  Yours  very  truly, 


If  friendly  letters  are  ignored  or  bring  no  response, 
it  is  for  the  physician  to  decide  the  next  step.  If  the 
patient  is  at  all  desirable  he  can  continue  writing  pleasant 
letters  from  time  to  time  until  payment  is  made,  or  he 
can  pay  a  friendly  visit  and  do  some  collecting  "on  the 
side";  or,  if  he  can  find  a  tactful  collector,  he  can  put 
the  account  in  this  collector's  hands. 

If,  however,  he  does  not  think  this  is  worth  while,  he 
can  write  more  insistent  letters,  or  turn  the  account  over 
to  a  collector,  regardless  of  whether  this  collector  is  tact- 
ful or  otherwise,  or  put  it  in  the  hands  of  an  attorney  for 
collection,  or  do  all  of  these. 

His  letters  at  this  stage  will  diiTer  but  little  from  other 
collection  letters.     The  excuses  for  writing  are  usually 


1 62  THE  ART  OF  COLLECTING 

dropped  and  the  letters  merely  demand  payment  of  the 
account.    The  following  letters  are  of  this  general  nature  : 

Dear  Madam : 

Your  account  is  long  overdue.  I  have  written  you  several  times 
asking  for  payment,  but  have  not  pressed  the  matter.  I  must  now 
insist  upon  payment  and  shall  expect  to  receive  a  remittance  from  you 
by  return  mail.  Yours  very  truly, 


Dear  Sir: 

For  some  reason  you  have  seen  fit  to  ignore  my  letters  asking  for 
a  settlement  of  your  account.  Your  conduct  in  the  matter  has  been 
both  discourteous  and  unbusinesslike,  and  I  must  insist  upon  an  imme- 
diate settlement.  I  should  be  sorry  to  proceed  to  extremes,  but  if  I  do 
not  hear  from  you  by  the  loth,  I  shall  place  the  account  in  the  hands  of 
my  attorneys  for  collection.  Yours  very  truly. 


Dear  Sir: 

The  amount  of  $30  due  me  on  your  account  has  been  dragging 
along  for  nearly  a  year  and  I  have  received  nothing  but  promises  of 
payment  I  cannot  wait  longer.  Unless  you  remit  by  return  mail,  or 
fix  a  date  in  the  near  future  on  which  you  will  remit,  I  shall  be  forced 
to  proceed  to  extreme  measures. 

Yours  very  truly, 


Dear  Sir: 

You  have  promised  several  times  to  pay  your  account  in  part  at 
least,  but  up  to  the  present  time  have  done  nothing  else  but  promise. 
The  account  is  long  overdue  and  I  am  tired  of  waiting.  You  must 
either  remit  by  return  mail  or  I  will  place  the  matter  in  the  hands  of 
my  attorney.  Yours  very  truly, 


Dear  Sir: 

The  amount  of  $30  for  professional  services  has  been  due  for  over 
a  year.  Your  many  promises  of  payment  have  failed  entirely.  I  do 
not  see  any  reason  why  I  should  wait  longer,  and,  unless  you  send  me 
at  least  a  part  of  the  amount  due  before  the  end  of  the  week,  I  shall 
place  the  matter  in  the  hands  of  my  attorney. 

Trusting  you  will  not  force  me  to  this  disagreeable  alternative,  I 
remain  Yours  very  truly, 


COLLECTION  LETTERS— PROFESSIONAL     163 

Lawyers*  Accounts 

The  collection  problems  of  the  attorney  are  compara- 
tively simple.  As  already  stated,  his  credits  are  within 
his  own  discretion.  He  usually  knows  whom  he  is  trust- 
ing, and  either  secures  enough  in  advance  as  a  retainer  to 
make  himself  fairly  safe,  or  knows  that  the  account  is 
good,  or  at  least  thinks  the  prospect  is  good  enough  to 
justify  his  taking  a  chance. 

In  any  event,  he  does  not  devote  much  time  to  col- 
lection letters.  What  letters  he  writes  are  usually  to  the 
point  and  are  frequently  summary.  The  accounts  are 
already  "in  the  hands  of  an  attorney,"  and  the  creditors 
usually  realize  this  fact,  and,  unless  they  are  execution 
proof,  comport  themselves  accordingly. 

Attorneys  usually  receive  a  retainer  at  the  time  they 
undertake  business,  and,  in  addition,  have  an  understand- 
ing as  to  when  payments  are  to  be  made,  and  then  hold 
their  clients  to  the  agreement.  Where  there  is  no  under- 
standing, bills  are  sent  at  the  time  the  work  is  completed, 
or,  where  the  work  is  continuing  or  long-drawn  out,  from 
time  to  time  as  the  attorney  thinks  proper. 

In  a  few  cases  where  attorneys  write  collection  letters, 
they  are,  as  stated,  simple  and  to  the  point.  The  follow- 
ing will  serve  as  examples: 


New  York,  June  15,  1913. 
Mk.  Henry  Smith, 

95  Broad  Street, 
New  York  Gty. 
Dear  Sir: 

There  is  a  balance  due  on  your  account  of  $75,  which  we  should 
be  glad  to  have  settled.  Will  you  kindly  send  us  a  check  for  the 
amount?  Yours  very  truly, 

WeSTCOTT  &  BURLINGAME. 


1 64  THE  ART   OF   COLLECTING 

Presumably  this  brings  the  desired  remittance  or  some 
response.     If  not,  the  following  letter  might  be  sent: 


New  York,  June  22,  1913. 

Mr.  Henry  Smith, 

95  Broad  Street, 

New  York  City. 
Dear  Sir: 

We  wrote  you  on  the  15th  asking  for  a  settlement  of  your  account, 
but  have  heard  nothing  from  you.  Will  you  kindly  send  us  your  check 
by  return  mail  or  advise  us  if  there  is  any  reason  that  prevents  your 
so  doing?  Yours  very  truly, 


If  no  response  is  received  to  this  letter,  the  "guilty 
party"  is  probably  called  up  on  the  telephone  and  a  very 
pointed  conversation  ensues.  If  for  any  reason  this  is 
not  desirable,  the  following  letter  might  be  written: 


New  York,  June  25,  1913. 
Mr.  Henry  Smith, 

95  Broad  Street, 

New  York  City. 
Dear  Sir: 

We  have  not  been  favored  with  a  reply  to  either  our  letter  of  the 
15th  or  the  preceding  letter  of  the  22d,  nor  have  we  had  the  remittance 
in  settlement  of  our  account  asked  for.  If  we  do  not  hear  from  you 
by  the  27th,  we  shall  bring  suit  for  the  amount. 

Yours  very  truly, 

Westcott  &  Burlingame. 


If  this  does  not  produce  the  desired  results,  the  first 
papers  of  a  suit  should  be  drawn  and  served  upon  the  de- 
linquent debtor.  This  will  add  costs  to  the  amount  of 
the  attorney's  bills;  and,  unless  the  debtor  is  entirely  col- 
lection proof,  he  will  not  let  the  matter  go  so  far.  If 
he  is  collection  proof,  the  attorneys  should  have  known 


COLLECTION  LETTERS— PROFESSIONAL     165 

this  fact  before  they  took  the  case,  and  they  should  either 
have  secured  a  sufficient  retainer  to  cover  the  whole  mat- 
ter, or  have  clearly  recognized  the  fact  that  they  were 
taking  chances.  In  this  latter  case  they  have  no  cause  of 
complaint  if  they  are  unable  to  collect. 


CHAPTER  XIV 
Collection  Letters — Miscellaneous 

Reports  on  Deposited  Drafts 

In  connection  with  collections,  sundry  letters  which 
are  not  directly  collection  letters  will  be  found  necessary. 
For  instance,  a  draft  on  an  out-of-town  debtor  may  have 
been  deposited  for  collection.  At  times  such  drafts,  as 
already  explained,  are  very  unreasonably  delayed,  and  it 
becomes  necessary  to  write  the  bank  to  find  out  the  cause. 
The  following  letter  is  suitable  for  this  purpose : 

June  15,  1913- 
Hamilton  National  Bank, 

61  Wall  Street, 

New  York  City. 
Gentlemen: 

May  23d  we  deposited  with  you  for  collection  our  sight  draft  for 
$125  on  John  C.  Harrison,  63  State  Street,  Chicago,  111.  Will  you 
kindly  advise  us  if  this  draft  has  been  paid,  and,  if  not,  ascertain  the 
cause  of  the  delay?  Yours  very  truly, 


Or,  more  briefly — 

Gentlemen: 

Will  you  please  advise  us  if  our  draft  on  John  C.  Harrison,  63 
State  Street,  Chicago,  111.,  for  $125,  dated  May  23,  1913,  has  been  paid? 

Yours  very  truly, 


It  is  but  seldom  that  the  bank  fails  to  report  a  draft 
that  has  been  paid.  Hence,  the  presumption  is,  when  a 
report  is  not  made,  that  the  draft  has  not  been  collected, 

166 


COLLECTION  LETTERS— MISCELLANEOUS     167 

or  at  any  rate  that  the  returns  have  not  been  receiv^ed 
by  the  bank  with  which  the  draft  was  originally  deposited. 
The  letter  might,  therefore,  take  this  ground  at  once  and 
read  as  follows: 

Gentlemen: 

Will  you  kindly  trace  our  draft  for  $125  on  John  C.  Harrison,  63 
State  Street,  Chicago,  111.,  which  was  deposited  with  you  for  collection 
May  23,  1913?  Yours  very  truly, 


Letters  to  Collection  Agencies 

When  an  account  is  placed  for  collection  with  an  at- 
torney or  a  collection  agency,  it  must  be  accompanied  by 
an  explanatory  letter.  This  letter  should  give  all  the  es- 
sential details  of  the  account,  and  should  also  specify 
whether  or  not  suit  Is  to  be  brought  in  case  collection 
cannot  be  made  In  any  other  way.  The  following  are 
letters  of  this  kind : 

June  2,  1913. 
Mercantile  Collection  Agency, 

251  Fifth  Avenue, 

New  York  City. 
Gentlemen: 

We  are  enclosing  statement  of  account  against  Robert  H.  McQel- 
land  for  $135.60,  now  nearly  six  months  overdue.  We  have  written  Mr. 
McQelland  repeatedly ;  but,  beyond  a  few  promises  to  pay,  which  were 
not  carried  out,  he  has  given  no  attention  to  the  matter.  Our  draft  on 
him  was  returned  unpaid. 

Please  see  what  you  can  do  with  the  claim,  but  do  not  bring  suit 
if  it  can  be  collected  in  any  other  way,  and  not  until  after  we  have 
given  you  specific  instructions  to  this  effect. 

Yours  very  truly, 


The  statement  sent  with  this  letter  gives  the  necessary 
details  as  to  the  goods  purchased,  and  it  is  not  usually 
necessary  to  bring  these  into  the  letter. 


1 68  THE  ART  OF  COLLECTING 

June  3,  1913- 
Mercantile  Collection  Agency, 

251  Fifth  Avenue, 

New  York  City. 
Gentlemen: 

We  enclose  herewith  statement  for  $75  due  us  from  James  L. 
McFarland,  of  Philadelphia.  We  place  this  in  your  hands  for  collec- 
tion, but  do  not  wish  you  to  bring  suit.  If  you  find  that  the  account 
cannot  be  collected  without  suit,  please  advise  us  and  let  the  matter 
drop.  Yours  very  truly, 


June  5,  1913- 
Mercantile  Collection  Agency, 

251  Fifth  Avenue, 

New  York  City. 
Gentlemen: 

We  enclose  herewith  account  for  $132  due  us  from  Henry  Samp- 
son, of  32  Broad  Street,  New  York  City.  Collect  this,  if  you  can, 
without  suit,  but  do  not  hesitate  to  bring  suit  if  you  find  it  necessary. 

Your  very  truly. 


June  6,  1913. 
Mercantile  Collection  Agency, 

251  Fifth  Avenue, 

New  York  City. 
Gentlem^en: 

Enclosed  you  will  find  invoice  for  bill  of  goods  purchased  by 
Hernxan  J.  Frenckel,  of  Chicago,  January  15,  1913.  These  goods  were 
sold  on  ninety  days'  time,  and  the  account  is  not  seriously  overdue. 
At  the  same  time,  it  should  have  been  paid  on  its  due  date;  and,  as 
Mr.  Frenckel  has  paid  no  attention  to  our  letters  in  regard  to  the 
matter  and  has  returned  our  draft  unpaid,  we  do  not  care  to  let  the 
matter  run  or  to  show  Mr.  Frenckel  any  further  consideration.  If, 
therefore,  he  will  not  pay  on  presentation,  bring  suit  at  once. 

Yours  very  truly. 


Letters  to  Collection  Agencies 

When  a  claim  is  placed  in  the  hands  of  an  attorney, 
ihe  letter  which  accompanies  it  will  not  vary  materially 
from  those  sent  to  a  collection  agency,  though  in  the  case 


COLLECTIOx\   LETTERS— MISCELLANEOUS     169 

of  an  atrorney  it  may  be  well  to  state  the  source  from 
which  his  name  was  secured;  i.  e.,  if  it  was  found  in  a 
legal  directory  or  lawyers'  list,  or  if  he  was  recommended 
by  some  responsible  party,  this  fact  might  be  mentioned 
as  tending  to  secure  better  attention  for  the  claim  than 
would  otherwise  be  the  case. 


Mr.  Henry  Lanston, 

316  Chestnut  Street, 

Philadelphia,  Pa. 
Dear  Sir: 

Please  find  enclosed  statement  of  $725  due  us  from  Samuel  E. 
Frankelstein,  317  Market  Street,  your  city.  The  account  is  at  least 
ninety  days  overdue,  and  Mr.  Frankelstein  pays  no  attention  to  our 
letters. 

Please  use  your  best  efforts  to  collect  the  account,  but  do  not  bring 
suit.  We  think  Mr.  Frankelstein  is  good  for  the  amount,  and  presum- 
ably a  strong  presentation  of  the  matter  will  be  sufficient. 

Yours  very  truly, 


Mr.  Harry  Fraser, 

315  Carondelet  Street, 

New  Orleans,  La. 
Dear  Sir: 

Mr.  William  H.  Johnson,  of  the  Third  National  Bank  of  this  city, 
has  referred  me  to  j'ou  as  a  responsible  attorney  in  whose  hands  I  can 
safely  place  any  business  I  may  have  in  New  Orleans. 

I  am  therefore  enclosing  herewith  statement  of  account  against 
Mr.  Walter  Gaspard,  of  316  Canal  Street,  for  the  sum  of  $325.  This 
account  is  ninety  days  overdue,  and  Mr.  Gaspard  pays  no  attention  to 
letters  or  to  drafts. 

Will  you  kindly  give  the  matter  your  best  attention  and  secure 
the  money  if  possible?  If  you  find  it  necessary,  the  matter  will  have 
to  be  brought  to  suit,  but  I  am  somewhat  reluctant  to  proceed  to  such 
extremes,  as  I  have  done  business  with  Mr.  Gaspard  for  a  number  of 
years,  and  do  not  wish  to  press  him  too  severely  if  it  can  be  avoided. 

Please  advise  me  before  bringing  suit,  if  you  find  suit  is  necessary. 

Yours  very  truly, 


lyo  THE  ART  OF  COLLECTING 

Mr.  Willard  Jones, 

Fresno,  Cal. 
Dear  Sir: 

Please  find  enclosed  statement  of  account  against  Harold  J. 
Varado,  of  your  city,  for  $90.  You  will  find  the  details  of  the  account 
on  the  statement.  The  watter  has  been  dragging  for  nearly  six 
months,  and  I  will  thank  you  to  give  it  prompt  attention. 

If  Mr.  Varado  will  not  pay  without,  I  wish  suit  to  be  brought,  but 
would  ask  you  to  advise  me  before  this  is  done. 

I  find  you  listed  in  Martindale's  Legal  Directory  as  a  reliable 
attorney  making  a  specialty  of  collections,  and  this  has  led  me  to  place 
the  present  matter  in  your  hands. 

Yours  very  truly. 


Mr.  James  Diller, 

618  Main  Street, 

Dallas,  Tex. 
Dear  Sir: 

I  enclose  herewith  details  of  a  claim  I  hold  against  Joseph  S. 
Francisco,  of  741  Elm  Street,  Dallas,  for  $575.25.  Full  details  of  the 
claim  are  given  in  the  enclosed  statement.  Some  items  of  the  claim 
arc  disputed,  and  this  has  kept  the  whole  matter  dragging  for  several 
years.  I  do  not  wish  to  let  it  run  longer,  and  will  therefore  ask  you  to 
take  the  matter  up  and  adjust  it  if  possible. 

If  Mr.  Francisco  will  pay  the  undisputed  part  of  the  claim,  I  am 
quite  willing  to  let  the  balance  run  until  you  and  he  can  discuss  the 
matter  thoroughly  and  reach  a  fair  settlement,  but  if  he  will  not  pay 
the  unquestioned  amount  I  think  suit  had  better  be  brought  without 
further  delay ;  and  this  will,  of  course,  be  for  the  whole  amount. 

Your  friend,  Mr.  Jamieson,  of  the  Security  Finance  Company  of 
this  city,  has  given  me  your  name,  and  has  assured  me  that  I  can  place 
the  matter  in  your  hands  with  implicit  confidence  that  it  will  receive 
careful  and  conscientious  attention. 

Awaiting  your  report,  I  remain 

Yours  very  truly, 


Direct  Remittances 

When  a  claim  Is  placed  in  the  hands  of  an  attorney 
or  collection  agency,  it  not  infrequently  happens  that  the 
debtor,  apparently  resenting  the  interposition  of  a  third 
party,  sends  his  remittance  direct  to  the  party  he  owes. 


COLLECTION  LETTERS— MISCELLANEOUS     lyi 

In  such  case  the  attorney  or  agency  should  be  notified  at 
once  and  Is  entitled  to  the  agreed  commission.  The  fol- 
lowing letters  can  be  used  in  such  cases: 

Jane  8,  1913. 
Mercantile  Collection  Agency, 

251  Fifth  Avenue, 

New  York  City. 
Gentlemen: 

We  are  in  receipt  of  a  remittance  of  $75  from  Mr.  James  L. 
McFarland,  of  Philadelphia,  in  full  settlement  of  the  account  placed 
in  your  hands  June  3d  for  collection.  You  are,  of  course,  entitled  to 
your  10  per  cent,  commission  on  this  amount,  and  we  are  enclosing 
herewith  our  check  for  $7.50  in  payment  of  same. 

Thanking  you  for  your  successful  efforts  in  the  matter,  we  remain 

Yours  very  truly, 


Mr.  John  Hayden, 

75  Maryland  Avenue, 

Washington,  D.  C. 
Dear  Sir: 

Mr.  Harvey  L.  Sprague,  of  your  city,  has  just  sent  us  $250  in  pay- 
ment of  the  claim  put  in  your  hands  for  collection.  This  should,  of 
course,  have  come  through  you,  but  I  do  not  suppose  you  will  object 
to  the  direct  remittance.  In  accordance  with  the  agreement  between 
us,  I  am  enclosing  herewith  your  fee  of  $25. 

Trusting  this  will  be  satisfactory,  I  remain 

Yours  very  tnily, 


Western  Collection  Agency, 

783  State  Street, 

Chicago,  111. 
Gentlemen: 

We  are  glad  to  state  that  a  remittance  of  $84  has  just  reached  us 
from  Mr.  John  H.  Klein,  of  your  city,  in  settlement  of  the  account 
placed  in  your  hands  some  ten  days  since  for  collection.  We  are  credit- 
ing you  with  $8.40 — 10  per  cent  of  the  amount  collected — which  we 
will  either  remit  or  dispose  of  otherwise,  as  you  may  direct. 

Thanking  you  for  your  promptness  in  the  matter,  we  remain 

Yours  very  truly, 


172  THE   ART  OF   COLLECTING 

Keeping  in  Touch  With  Collect'ons 

Even  though  a  claim  is  placed  in  the  hands  of  at- 
torneys or  with  a  collection  agency,  it  is  still  necessary  to 
keep  in  touch  with  the  matter  and  see  that  it  is  not  al- 
lowed to  lag.  A  good  collection  agency  will  report  from 
time  to  time  on  claims  put  in  its  hands,  whether  these 
claims  are  collected  or  not.  Attorneys,  as  a  rule,  do  not 
do  this,  but  hold  the  matter  until  something  definite  has 
been  accomplished.  If  either  agency  or  attorney  is  dere- 
lict as  to  reports,  it  will  be  necessary  to  write;  and  this 
should  be  done  without  too  much  delay.  Particularly  is 
this  necessary  when  the  claim  is  placed  in  an  attorney's 
hands,  for  occasionally,  if  the  attorney  happens  to  be  a 
friend  of  the  delinquent  debtor,  he  will  purposely  delay 
the  matter  as  long  as  the  creditor  will  let  it  rest,  or,  if 
the  matter  is  a  small  one,  may  let  it  drag  because  there 
is  but  little  profit  in  it  for  him.  In  either  case  a  "prod- 
ding" letter  will  be  beneficial.  The  forms  which  follow 
are  of  this  nature: 

Gentlemen: 

Will  you  please  report  on  our  claim  for  $75  against  George  S. 
Q)llins,  89  'Lake  Avenue,  Cleveland,  Ohio,  which  was  placed  in  your 
hands  for  collection  May  15,  1913? 

Your  prompt  attention  to  this  matter  will   be  greatly  appreciated. 

Yours  very  truly. 


Gentlemen: 

We  have  not  yet  heard  from  you  in  regard  to  our  claim  of  $75 
against  George  S.  Collins.  Will  you  kindly  report  at  once  its  exact 
condition?  Yours  very  truly, 


If  the  matter  was  placed  in  the  hands  of  an  attorney, 
the  following  letter  might  be  found  suitable: 


COLLECTION   LETTERS— xMISCELLANEOUS      173 

Dear  Sir: 

May  15,  1913,  an  account  ag^ainst  James  H.  McGill,  of  your  city, 
for  $125,  was  placed  in  your  hands  for  collection.  We  have  not  yet 
received  a  report  on  this  matter.  Will  you  kindly  inform  us  just  what 
you  have  done  and  what  are  the  prospects  of  payment? 

Yours  very  truly, 


If,  as  not  infrequently  happens,  this  produces  no  re- 
sult, the  next  letter  might  be  used  as  a  follow-up  : 

Dear  Sir: 

We  wrote  you  on  June  15th  in  regard  to  our  claim  of  $125  against 
James  H.  McGill,  of  your  city.  This  claim  has  been  in  your  hands  for 
over  a  month,  but  we  have  had  no  report  of  progress,  and  have  heard 
nothing  from  you  in  any  way  save  your  first  bare  acknowledgment  that 
the  claim  had  reached  you. 

We  are  somewhat  surprised  at  this  prolonged  silence  on  your  part, 
and  will  ask  you  to  inform  us  at  once  just  what  you  have  done  and 
what  are  the  prospects  of  a  prompt  collection. 

Yours  very  truly, 


Defective  Remittances 

It  sometimes  happens  that  when  remittances  are  re- 
ceived in  the  form  of  checks  or  exchange,  signatures  or 
endorsements  are  omitted.  Occasionally  this  is  done  with 
intent  on  the  part  of  the  remitter,  as  he  calculates  that 
the  check  will  be  returned  to  him  for  signature  or  en- 
dorsement, that  he  can  hold  it  a  day  or  two  before  re- 
turning it,  and  that  he  will  thus  gain  the  time  consumed 
in  transit  and  the  time  that  the  check  is  in  his  hands,  the 
total  in  the  case  of  far  distant  points  sometimes  aggre- 
gating between  two  and  three  weeks. 

What  the  collection  manager  is  to  do  in  a  case  of  this 
kmd  will  depend  largely  on  circumstances.  The  most 
obvious  thing  is  to  return  the  defective  instrument  to  the 
debtor  for  signature.  In  such  case  a  letter  similar  to  the 
following  will  serve : 


174  THE  ART  OF  COLLECTING 

Jtmc  i6,  1913. 
Mil  William  Jackson, 

813  Lake  Avenue, 

Chicago,  111. 
Dear  Sir: 

We  are  in  receipt  of  your  check  for  $235,  sent  us  in  settlement  of 
j'our  May  account.  The  check  reaches  us,  however,  without  a  signa- 
ture. We  are  therefore  enclosing  the  check  herewith  and  will  ask 
you  to  sign  it  and  send  it  back  to  us  by  return  mail. 

Yours  very  truly, 


It  is  sometimes  wiser  not  to  return  the  check  for 
signature.  If  it  gets  back  into  the  sender's  hands,  it  may 
be  a  long  time  before  it  comes  back  again,  and  in  any 
case  a  delay  is  involved.  As  an  alternative,  the  check 
may  be  deposited,  with  a  guarantee  from  the  depositor, 
or  with  a  request  to  the  bank  to  forward  same  for  signa- 
ture and  collection.  It  is  then  in  order  to  write  the 
party  from  whom  the  check  was  received,  advising  him 
of  the  conditions  and  what  has  been  done.  In  due  time 
the  check  will  arrive  and  be  presented  to  the  drawer  for 
signature,  and  it  is  but  seldom  that  a  concern  or  individual 
of  any  credit  standing  will  refuse  to  sign.  The  following 
letter  will  serve  on  occasions  of  this  kind: 

June  16,  1913. 
Mr.  William  Jackson, 

813  Lake  Avenue, 

Chicago,  III. 

Dear  Sir: 

We  are  in  receipt  of  your  check  for  $235,  sent  us  in  settlement  of 
your  May  account.  The  check  is,  however,  unsigned.  This  was,  of 
course,  an  oversight  on  your  part,  and  we  are  depositing  the  check  for 
collection,  with  a  guarantee  on  our  part  that  you  will  sign  it  on  presen- 
tation. 

Thanking  you  for  the  remittance,  and  regretting  the  trouble  we 
&re  forced  to  give  you  in  the  matter,  we  remain 

Yours  very  truly. 


COLLECTION  LETTERS— MISCELLANEOUS     175 

The  following  quotation  from  D.  W.  Pomeroy,  writ- 
ing in  the  Bulletin  of  the  National  Association  of  Credit 
Men,  will  be  found  interesting  in  this  connection: 

"Occasionally  defective  remittances  are  received,  and 
in  some  cases,  evidently  for  the  purpose  of  killing  time, 
we  get  communications  purporting  to  enclose  checks, 
checks  made  out  wrongly,  checks  not  signed,  checks  or 
drafts  to  remitter's  order  not  endorsed. 

"In  such  as  the  first  or  the  last  cases  I  make  a  draft 
for  the  amount  specified,  pin  the  same  to  the  letter,  de- 
posit them  in  the  regular  account,  and  notify  the  debtor 
why  draft  is  made. 

"In  the  second  case,  I  write  on  the  back  over  our 
signature,  'Amount  guaranteed,'  mentioning  the  correct 
amount,  attach  letter,  and  deposit. 

"In  the  third  case,  I  write  over  our  signature,  'Within 
amount  guaranteed,'  attach  the  letter  thereto,  and  deposit. 

"In  the  fourth  case,  I  examine  the  letter  carefully,  and 
if  it  shows  that  the  draft  was  sent  to  us  for  credit,  I 
supply  the  endorsement  by  myself,  as  agent,  and  deposit 
same,  retaining  letter  as  my  authority  for  so  doing. 

"I  have  had  many  defective  remittances  as  above  and 
with  a  single  exception  all  have  been  paid;  and  never  a 
single  complaint  from  any  source  by  reason  thereof  has 
come  to  me. 

"Referring  again  to  the  fourth  case,  while  I  hesitate 
to  advise  the  procedure  named,  lest  I  may  be  misunder- 
stood, I  want  to  say  that  I  do  not  hesitate  to  avail  myself 
of  its  advantages,  having  obtained  advice  of  the  best 
counsel  that,  under  the  conditions  stated,  authority  is 
clearly  given." 


CHAPTER  XV 
The  Collector  and  His  Work 

Personal  Collections 

Modern  collecting  is  done  chiefly  by  correspondence. 
There  are  times,  however,  when  collections  are  better 
made  by  personal  visits,  and  personal  effort  is  sometimes 
advantageous  after  the  resources  of  correspondence  have 
been  exhausted.  Collectors  are  therefore  commonly 
found  in  the  larger  mercantile  concerns,  and  also  in  some 
lines  of  business  where  special  conditions  require  their 
employment. 

In  a  business  of  any  magnitude,  the  collection  man- 
ager's time  and  attention  is  needed  for  more  important 
matters  than  for  the  personal  collection  of  ordinary  in- 
dividual accounts.  Collectors  must  therefore  be  em- 
ployed, and,  as  these  are  subordinate  to  the  collection 
manager,  they  are  usually  employed  by  him. 

Qualifications  of  a  Collector 

The  collector  should  hav^e  some  business  experience 
and  a  sufficient  knowledge  of  bookkeeping  to  enable  him 
to  keep  an  accurate  record  of  what  he  collects.  In  ap- 
pearance he  should  be  neat,  as  in  his  interviews  with 
customers  he  represents  the  house,  and  will  represent  it 
more  adequately,  be  treated  with  greater  respect,  and  se- 
cure better  results,  if  he  is  properly  dressed.     People  are 

176 


THE  COLLECTOR  AND   HIS   WORK  177 

inclined  to  resent  requests  for  money.  Hence,  the  col- 
lector must  be  able  to  approach  them  tactfully.  He  must, 
as  a  matter  of  principle,  be  courteous,  and  at  the  same 
time  must  also  be  firm.  He  must  have  sufficient  intelli- 
gence and  knowledge  of  human  nature  to  make  a  study 
of  each  customer  and  decide  the  best  line  of  approach. 
Also,  he  must  possess  a  large  amount  of  patience  and  per- 
sistence; as  many  debtors,  apparently  hopeless,  will,  if 
followed  closely,  make  payment  at  last. 

It  must  be  confessed  that  the  collector  must  not  be  too 
thin-skinned.  A  sensitive  man  does  not  make  a  good  col- 
lector. Be  he  tactful  as  he  may,  the  persistent  follow-up, 
which  is  part  of  the  collector's  duties,  will  occasionally 
offend;  and  he  must  then  be  able  to  meet  the  reproaches 
and  perhaps  the  abuse  of  delinquent  debtors  with  dignity, 
with  proper  but  not  offensive  independence,  and  without 
humiliation. 

The  successful  collector  must  be  honest.  To  promote 
his  honesty  it  is  wise  for  the  house  to  require  a  bond,  even 
though  it  pays  the  cost  itself.  When  a  bond  is  required, 
the  collector  will  feel  in  a  way  that  he  is  pledged  to 
honesty,  also  that  his  movements  are  subject  to  the 
scrutiny  of  the  bonding  company.  If  he  is  honest  he  will 
not  object  to  this,  for  there  is  nothing  for  scrutiny  to  dis- 
cover. If  he  is  not  honest,  the  knowledge  that  he  may  be 
watched  tends  to  make  him  honest — at  least  as  to  his 
collection  moneys. 

The  collector  must  also  be  energetic.  Energy,  as 
considered  from  the  standpoint  of  the  collection  depart- 
ment, is  ability  to  get  work  done;  to  put  things  through 
— not  merely  ability  to  call,  but  ability  to  call  and  come 
away  with  money,  or  with  the  debtor's  promise  either  to 


178  THE  ART  OF   COLLECTING 

pay  on  some  definite  date,  or  to  come  round  for  a  per- 
sonal interview  with  the  manager.  Results  are  what  the 
collection  manager  wants,  and  results  are  not  secured  by 
sitting  down  and  waiting  for  them  to  come  round. 

It  goes  without  saying  that  the  collector  and  the  col- 
lection manager  must  be  in  entire  harmony  with  each 
other.  The  collection  manager  cannot  produce  proper 
results  if  his  subordinates  do  not  co-operate  with  him. 
If,  therefore,  the  collector  persists  in  disregarding  the 
wishes  of  the  collection  manager  and  does  not  carry  out 
instructions,  the  only  thing  to  do  is  to  get  another  col- 
lector who  is  better  versed  in  the  requirements  of  team 
work. 

Employing  Collectors 

It  is  sometimes  difficult  to  find  capable  collectors;  but 
not  infrequently  first-class  men  who  could  not  otherwise 
be  secured,  will  take  a  collector's  position  for  the  sake 
of  the  outdoor  work.  In  these  men,  whose  health  will 
not  longer  stand  the  confinement  of  office  work,  the  man- 
ager often  finds  collecting  ability  of  a  high  order,  made 
more  valuable  by  a  thorough  office  training.  Such  men 
cannot  be  regarded  as  inexperienced,  even  though  the 
actual  work  of  the  collector  be  new  to  them.  With  a 
little  advice  and  help,  they  can  usually  take  hold  and  re- 
lieve the  collection  manager  in  a  way  which  would  be 
impossible  for  a  really  inexperienced  man. 

The  question  of  the  collector's  compensation  will  be 
decided  by  the  house.  A  good  collector  can  earn  from  ten 
to  twenty  dollars  a  week — oftentimes  more.  An  excel- 
lent arrangement  is  to  pay  the  collector  a  nominal  salary, 
and  a  commission  on  all  he  collects  each  week  above  a 


THE  COLLECTOR  AND   HIS   WORK  179 

certain  amount.  This  adds  greatly  to  the  interest  of  his 
work  and  also  to  its  results. 

In  employing  collectors,  look  well  to  their  references, 
and  make  careful  inquiry  into  their  family  history.  Much 
information  can  thus  be  obtained  as  to  their  honesty  and 
ability.  A  bond  should,  as  stated,  always  be  required; 
and  the  fact  that  the  collector  is  accepted  by  a  bonding 
company  is  pretty  good  evidence  that  he  is  honest,  as  the 
bonding  companies  look  up  the  applicant's  record  very 
thoroughly  before  assuming  any  risk. 

When  a  collector  is  once  employed,  he  should  not  be 
discharged,  nor  should  a  new  man  be  brought  into  his 
place,  without  the  best  of  reasons.  The  knowledge  the 
collector  has  gained  of  the  accounts  and  of  the  customers 
of  the  house  enables  him  to  accomplish  a  great  deal  more 
than  is  possible  for  a  new  man.  Also,  it  is  not  usually 
advisable  to  take  the  risk  of  this  information  going  to 
some  competing  house. 

Training  Collectors 

The  manager  should  realize  the  importance  of  start- 
ing his  collectors  right.  The  necessity  of  systematic  work 
must  be  impressed  upon  them;  and  they  should  be  made 
to  feel  that  the  manager  is  ready  to  give  them  advice 
when  they  are  in  trouble,  and  to  stand  back  of  them  in 
all  their  efforts.  The  collector  should  also  acquire  a 
general  knowledge  of  the  business,  not  that  he  may  make 
sales,  but  that  he  may  be  able  to  discuss  its  accounts  and 
its  affairs,  when  necessary,  in  an  intelligent  manner.  It  is 
obvious  that  a  man  who  is  not  familiar  with  the  details 
of  the  business  is  at  a  distinct  disadvantage  in  meeting 


i8o  THE  ART  OF  COLLECTING 

the  protests,  the  objections,  and  the  evasions  of  dehnquent 
customers. 

A  man  new  to  the  collecting  business  must  have  train- 
ing and  some  experience  before  he  can  handle  much  work. 
On  the  other  hand.  It  often  proves  more  satisfactory  to 
employ  a  young  man  Inexperienced  In  the  work  than  an 
experienced  collector,  as  the  inexperienced  man  will  be 
freer  from  bias,  quicker  to  adopt  new  methods,  and  more 
likely  to  carry  out  Instruction. 

Honesty  of  Collectors 

The  collector  should  be  Impressed  with  the  responsi- 
bility which  attaches  to  handling  other  people's  money. 
Too  frequently  collectors  are — or  become — dishonest, 
and  misappropriate  both  the  concern's  time  and  its  money. 
It  begins,  perhaps,  with  little  irregularities.  The  collec- 
tor takes  time  on  his  rounds  to  attend  a  horse-race  or  a 
ball-game,  or  he  stops  work  to  play  a  game  of  billiards  or 
pool.  Gambling  almost  inevitably  follows,  and  small  bets 
lead  on  to  larger,  until  the  collector  begins  taking  the 
concern's  money  In  order  to  pay  these  gambling  debts. 
Tn  the  early  days  the  "beginning"  defaulter  takes  this 
money  with  the  Intention  of  putting  it  back;  but,  losing 
continually,  he  Is  soon  so  badly  In  debt  that  repayment 
is  impossible,  and  the  end  is  only  a  question  of  time. 

In  addition  to  the  safeguard  of  the  bond,  some  very 
careful  system  of  checking  the  collector's  work  should  be 
employed.  The  collector  may  perhaps  have  reported  a 
promise  to  pay  when  In  reality  the  money  has  been  paid 
to  him  already.  If  there  is  a  suspicion  of  this,  and 
especially  when  the  amount  is  large,  a  letter  should  be 
written  to  the  debtor  stating  that  the  house  is  relying  on 


THE  COLLECTOR  AND  HIS  WORK  i8i 

receiving  his  payment  on  the  date  it  is  promised.  If  pay- 
ment has  not  been  made,  this  will  help  the  collection 
eventually;  but,  if  the  collector  has  received  and  kept  the 
money,  the  debtor  will  very  promptly  institute  inquiries 
to  find  out  why  he  has  not  received  credit.  It  may  aid 
the  collector  to  let  him  know  casually  from  time  to  time 
that  such  letters  are  being  sent  out  as  a  means  of  helping 
his  collections.  He  will  then  not  dare  to  withhold  funds 
which  do  not  belong  to  him,  as  he  will  suppose  the  same 
method  is  followed  with  all  accounts,  or,  if  not,  will  be 
unable  to  tell  which  accounts  are  thus  followed  up.  The 
condition  will  thus  act  as  a  check  on  his  entire  work. 

The  collector  should  make  a  report  of  the  amount  he 
brings  in  each  day,  and  this  report  should  be  filed  away 
for  reference.  Praise  when  he  makes  a  good  record, 
pleasant  comment  when  the  record  is  poor,  will  stimulate 
him  to  his  utmost.  The  mere  knowledge  that  what  he 
does  is  watched  and  appreciated,  when  it  is  worthy  of 
appreciation,  will  be  a  distinct  encouragement.  He  should 
be  led  to  feel  that  there  is  a  future  to  his  work,  and  that, 
if  he  makes  good  as  a  collector,  there  is  more  pay  and 
a  better  position  before  him. 

The  Work  of  the  Collector 

The  collector's  work  is  distinctly  the  collection  of 
debts.  If  he  gets  prospects,  he  can  turn  them  in  to  the 
sales  department  He  should  not  be  allowed  to  make 
sales.  If  he  has  the  selling  instinct  too  strongly  de- 
veloped to  be  suppressed,  turn  him  into  a  salesman,  but 
do  not  let  him  be  both  collector  and  salesman.  Sales 
and  collections  do  not  work  together  to  advantage. 

While  collectors  cannot  sell  to  advantage,  it  is  equally 


1 82  THE  ART  OF   COLLECTING 

true  that  a  salesman  cannot  collect  to  the  best  effect.  He 
cannot  advantageously  use  the  arts  of  the  salesman  to 
persuade  a  prospect  into  buying  goods,  and  then — trans- 
formed into  a  collector — bully  him,  as  is  sometimes 
necessary,  into  paying  for  them.  He  may  do  it  once,  but 
on  his  next  trip  as  a  salesman  he  will  find  himself  heavily 
handicapped.  The  salesman-collector  might  be  capable 
of  playing  the  double  part  indefinitely;  but  the  customer 
is  apt  to  object. 

Under  some  circumstances,  as,  for  instance,  where  the 
distance  is  great,  and  frequently  in  small  businesses,  the 
salesman  must  perforce  act  as  a  collector  also.  The  sales- 
man-collector will  not,  as  a  rule,  collect  as  effectively  as 
a  collector  who  is  not  a  salesman;  but  he  should  do  fairly 
good  work  at  least,  and,  when  payment  cannot  be  se- 
cured, should  always  be  able  to  find  out  the  reason  for 
this  non-payment. 

The  collector  must  believe  thoroughly  that  he  is  going 
to  get  his  money,  but  he  must  not  be  too  optimistic  about 
getting  It  quickly.  He  should  understand  that  he  is  to  give 
time  enough  to  every  debtor  to  get  the  money,  or  to  find 
out  why  he  cannot  get  it.  He  must,  nevertheless,  under- 
stand that  he  is  not  to  become  too  familiar  with  the  cus- 
tomers, nor  to  lose  time  and  endanger  his  efficiency  by 
visiting  with  them  too  freely.  It  Is  very  difficult  to  force 
payment  from  a  friend. 

Above  all  things  the  collector  should  never  get  angry 
himself,  unless  he  does  it  as  a  collection  measure  with 
intent.  He  must  also  prevent  the  customer's  losing  his 
temper,  If  possible.  This  holds  true  even  In  the  temper- 
trying  operation  of  the  "sweating  process,"  when  the  col- 
lector calls  on  the  debtor  with  the  intention  of  staying 


THE  COLLECTOR  AND  HIS   WORK  183 

until  he  gets  his  money — going  carefully  over  the  facts 
of  the  case,  pleading,  threatening,  and  bringing  every 
possible  pressure  to  bear  in  order  to  attain  his  end.  Under 
such  circumstances  the  debtor  will  naturally  be  greatly 
annoyed,  will  sometimes  becomes  violently  angry  and 
insulting,  will  use  every  device  to  discourage  the  collector 
and  to  avoid  payment,  but  will,  on  the  other  hand,  not 
infrequently  pay  up  just  to  get  rid  of  his  tormentor.  The 
strain  upon  the  collector  is,  however,  even  greater  than 
upon  his  victim,  and  a  successful  "operation"  requires 
a  self-control,  a  resourceful  skill,  and  a  persistence,  that 
are  found  only  in  the  more  able  and  experienced  collectors. 

When  the  collector  finds  a  debtor  cannot  pay,  he 
should  get  some  definite  promise  for  the  near  future.  He 
should  also  find  out  what  the  debtor's  resources  are,  and 
get  such  information  as  he  can  about  his  general  financial 
condition.  Sometimes  in  very  difficult  cases  it  may  be 
wise  for  the  collector  to  take  an  attorney  with  him,  and, 
should  the  debtor  be  unable  to  make  payment  at  the  time, 
persuade  him,  if  possible,  to  give  a  note  secured  by  a  real 
estate  mortgage,  or  as  a  last  resort  by  a  chattel  mortgage. 
If  he  consents,  this  is  drawn  up  then  and  there,  and,  as 
soon  as  signed,  gives  additional  security,  and  enables 
collection  to  be  made  through  the  courts,  if  necessary. 

Debtors  are  frequently  out  when  the  collector  calls, 
and  some  of  them  cannot  be  found  in  business  hours  at 
all.  A  collector  who  is  really  interested  in  his  work  and 
who  expects  to  make  a  success  of  it,  must  be  willing  to 
call  on  such  accounts  in  the  evening  or  early  morning,  or 
whenever  they  can  be  found.  When  a  debtor  is  not  at 
home  at  the  time  of  the  collector's  call,  he  should  leave 
a  note  under  the  door,  stating  that  he  has  been  there, 


1 84  THE  ART  OF  COLLECTING 

and  asking  the  debtor  to  see  the  manager  at  the  store. 
Every  time  he  calls  he  should  either  see  the  debtor  or 
leave  something  to  show  that  he  has  been  there.  Some- 
times the  mere  number  of  times  the  collector  has  called 
will  shame  the  debtor  into  paying. 

A  difficult  and  important  work  frequently  assigned 
the  collector  is  the  tracing  of  debtors  who  have  moved 
without  notifying  the  house  of  their  new  address.  In 
many  cases  this  omission  is  merely  an  oversight  on  the 
customer's  part,  but  occasionally  it  is  done  with  intent  to 
defraud.  In  such  work  the  collector  must  assume  the 
role  of  a  detective,  making  inquiry  from  next-door  neigh- 
bors, from  neighboring  stores,  and  from  anyone  else 
likely  to  know  where  the  debtor  has  moved.  By  such 
inquiries  he  may  discover  the  debtor's  new  address,  or 
perhaps  can  ascertain  the  name  of  the  transfer  company 
which  did  the  moving,  and  through  this  company  discover 
the  missing  trail. 

When  two  or  more  collectors  are  employed  in  hand- 
ling city  accounts,  the  town  is  usually  divided  in  sections, 
each  collector  confining  his  calls  to  those  customers  who 
are  in  his  own  division.  When  a  firm  operates  branch 
stores,  each  store,  as  a  rule,  has  its  own  collector  or  col- 
lectors, who  call  on  all  customers  in  its  territory.  The 
traveling  expenses  of  such  a  collector,  and  the  time  con- 
sumed, will  obviously  be  much  less  than  in  the  case  of  a 
collector  sent  out  from  the  main  office. 

It  frequently  occurs  in  out-of-town  accounts  that  an 
overdue  amount  is  a  small  one — perhaps  but  a  few  dol- 
lars— and  not  enough  to  justify  a  special  call.  In  such 
cases  the  collector  should  keep  the  account  in  mind,  and 
call  whenever  he  is  in  the  locality  of  the  debtor.     The 


THE  COLLECTOR  AND  HIS  WORK 


185 


amount  will  not  justify  a  special  trip,  but  this  continual 
incidental  calling  will  usually  secure  payment.  The  debtor 
sometimes  pays  for  the  sole  purpose  of  stopping  the  col- 
lector's very  annoying  visits. 

The  collector  should,  as  a  matter  of  course,  always 
promptly  report  any  change  of  address  on  the  part  of 
debtors.  Such  changes  are  continually  occurring,  espe- 
cially with  the  smaller  accounts,  and  are  for  the  most 
part  in  good  faith  and  without  intention  of  evading  pay- 
ment If,  however,  they  are  not  reported  and  recorded, 
the  effect  is  the  same  as  if  evasion  of  payment  were 
intended. 

Collector's  Daily  Report 

Each  day  the  collection  manager  will  give  the  collector 
a  certain  number  of  unpaid  accounts,  which  he  is  to  route 
in  a  systematic  manner,  so  that  they  may  be  covered  with 
the  smallest  loss  of  time  in  getting  from  place  to  place. 
At  the  end  of  the  day  the  collector  should  be  required 
to  torn  in  a  daily  report  showing  exactly  what  he  has 
done.  A  card  may  be  used  for  this  purpose  and  the 
report  should  be  very  simple.  The  following  is  an  ex- 
cellent form; 


CaLiECTOR   .- Date. 


NAME  or  CUSTOMED 


AMOUNT 
COLLECTED 


REPORT 


1 86  THE  ART  OF   COLLECflNG 

Each  card,  as  handed  to  the  collector,  has  on  it  the 
names  and  addresses  of  the  customers  on  whom  he  Is  to 
call,  and  also  the  ledger  folios  of  the  accounts.  The 
ledger  folio  is  for  bookkeeping  purposes  and  does  not 
directly  concern  the  collector.  The  customer's  name  and 
address  gives  the  collector  his  working  instructions  and 
enables  him  to  route  his  day's  work  to  advantage.  The 
amount  collected  Is  an  essential  feature  of  the  report, 
serving  both  as  a  record  and  as  a  check  on  the  collector. 

The  report  provided  for  in  the  last  column  of  the 
card  is  an  important  feature.  If  payment  has  not  been 
made,  this  report  must  be  definite,  stating  the  exact  date 
when  the  debtor  promises  to  pay  and  his  reasons  for  not 
paying  at  the  present  time;  also  any  other  Information, 
such  as  change  of  address,  etc.,  which  will  be  of  use  to 
the  collection  department.  The  card  does  not  give  much 
room  for  verbiage;  hence,  the  collector  must  be  taught 
how  to  report  In  the  fewest  possible  words  that  will 
bring  out  all  the  facts.  Much  Information  can  be  con- 
veyed In  a  ten-word  telegram,  and  the  collector  should 
phrase  his  report  in  the  same  "telegrammatic"  language. 
This  method  saves  time  both  for  the  collector  and  the 
manager.  The  style  is  not  difficult  to  acquire,  and  its 
value  is  well  worth  the  effort. 


CHAPTER  XVI 

Legal  Phases  of  Collecting 

Collection  Law 

The  collection  manager  need  not  be  a  lawyer,  but  he 
should  have  a  good  knowledge  of  collection  law.  This 
Is  not  to  enable  him  to  do  the  work  of  an  attorney,  but 
merely  to  qualify  him  properly  for  his  own  work.  It 
will  be  readily  understood  that  a  knowledge  of  the  legal 
conditions  affecting  collections — what  he  may  do,  and 
what  he  may  not  do,  and  the  general  possibilities  both 
before  and  after  suit — is  of  the  greatest  value  to  the  col- 
lection manager.  In  fact,  he  cannot  be  first-class  in  his 
work  without  a  fair  knowledge  of  collection  law. 

No  complete  presentation  of  the  subject  is  possible 
within  the  limits  of  the  present  chapter.  All  that  can  be 
done  is  to  give  a  few  of  the  more  important  facts  and 
features  of  the  law  which  apply  in  collection  work — just 
enough  to  Indicate  the  lines  along  which  the  collection 
manager  should  pursue  his  own  studies. 

Collecting  by  Legal  Proceedings 

Collection  by  legal  proceedings  is  the  last  resort  of 
the  collection  manager.  It  is  usually  expensive,  always 
troublesome,  and  invariably  alienates  the  customer.  It  is 
a  confession  of  inability  to  collect  the  account  In  any  other 
way.     The  collection  manager  can  never  build  a  reputa- 

187 


1 88  THE  ART  OF  COLLECTING 

tion  on  collections  made  through  the  court-room.  In 
some  cases,  however,  collection  by  legal  process  is  un- 
avoidable. Then  it  should  be  employed  without  hesita- 
tion, and,  once  decided  upon,  should  be  pushed  as 
vigorously  and  effectively  as  possible. 

While  collection  by  legal  proceedings  is  not  to  be  em- 
ployed until  it  is  clearly  apparent  that  collection  can  be 
made  in  no  other  way,  the  fact  that  suit  can  be  brought 
is  one  of  the  most  effective  collection  measures  at  the 
command  of  the  collection  manager.  The  ordinary  per- 
son has  but  slight  knowledge  of  the  law.  He  knows  it  is 
costly  and  troublesome,  mysterious  as  to  its  workings,  and 
frequently  inexplicable  as  to  its  results.  So  greatly  does 
he  dread  it  that  with  many  debtors  the  mere  threat  of 
a  lawsuit,  properly  made,  is  enough  to  bring  about  a 
settlement. 

Employment  of  Attorneys 

When  collection  by  suit  is  necessary,  an  attorney  must 
be  employed.  In  fact,  in  a  great  many  cases  attorneys 
may  be  employed  to  advantage  before  suit  is  necessary  or 
even  contemplated.  A  letter  from  an  attorney  to  a  debtor, 
stating  that  the  account  is  in  his  hands,  and  suggesting 
that  it  would  be  advantageous  for  the  debtor  to  call,  will 
often  be  sufficient  to  bring  him  to  the  attorney's  office; 
and,  once  there,  some  settlement  without  recourse  to  the 
courts  should  be  possible.  This  is  due  to  the  general  fear 
of  a  lawsuit  already  referred  to.  The  attorney's  letter 
convinces  the  debtor  that  suit  will  be  brought  unless  the 
matter  is  settled.  Indeed,  in  many  cases  the  recipient  of 
such  a  letter  thinks  that  suit  has  actually  been  brought 


LEGAL  PHASES  OF  COLLECTING     189 

and  that  this  letter  is  the  first  step,  and  comports  himself 
accordingly. 

Attorneys'  Fees 

When  an  attorney  is  to  be  employed  it  is  always  well 
to  have  a  distinct  understanding  as  to  his  charges  before 
he  is  engaged.  If  the  attorney  is  obtained  from  some 
agency  list,  the  fees  are  usually  fixed  and  understood,  and, 
if  for  any  reason  a  different  fee  is  proper  and  allowable, 
the  attorney  will  advise  his  client  before  proceeding.  Ten 
per  cent  is  the  usual  charge  on  small  accounts  collected 
without  suit,  this  fee  decreasing  as  the  amount  involved 
increases.  On  small  accounts  there  is  usually  some  min- 
imum fee  below  which  the  attorney  will  not  go,  as,  for 
instance,  $3  or  $5.  Where  suit  is  necessary,  attorneys 
frequently  receive  one-half  of  the  amount  collected,  the 
attorney  then  usually  paying  the  court  costs.  The  at- 
torney's fee  will,  of  course,  be  larger  where  collection  is 
made  by  suit  than  where  the  matter  is  settled  without 
recourse  to  the  courts. 

The  following  representative  table  of  collection  rates 
and  rules  are  those  which  obtain  for  the  United  States 
among  the  attorneys  of  a  well-known  "mercantile  service"  : 

COLLECTION  RATES  AND  RULES 
Note. — These    rates    do    not   apply   to   collections    outside   of   the 
United  States  and  Canada.     Special  agreement  and  rates  must  be  made 
with  foreign  correspondents  when  placing  claims. 

I. — First  Class — Claims  collected  on  first  notice  or  demand: 
5%  on  first  $200  or  less. 
2^%  on  excess  of  $200  to  $500. 
1%  on  excess  of  $500. 
Minimum  fee,  $2. 


I90  THE  ART  OF  COLLECTING 

2. — Second   Gass — Gairns  collected  by   repeated  duns,   notices  or 

demands : 
10%  on  first  $200  or  less. 
5%  on  excess  of  $200  to  $1,000. 
2j4%  on  excess  of  $1,000. 
Minimum  fee,  $3. 

On  claims  of  $6  or  less,  the  fee  sliall  not  exceed  one-half  the 
claim. 
3. — Third  Class — Claims  collected  by  suit: 
10%  of  the  amount  recovered. 
Minimum  fee,  $5. 
4. — Suit  must  not  be  brought,  or  costs  or  any  expanse  which  would 
be  chargeable  to  client  incurred,  without  authority.    Costs  and  disburse- 
ments must  be  advanced  by  clients  before  suit  is  brought.     Should  the 
nature  of  the  suit  justify  an  extra  charge,  client  must  be  notified  and 
the  charge  agreed  upon  in  advance. 

5. — Where  by  law  or  bar  rules,  a  different  rate  from  the  above  is 
obligatory  on  the  attoi'ney,  prompt  notice  must  be  given  clients  or  for- 
warders, and  the  privilege  accorded  of  accepting  terms  or  withdrawing 
the  claim. 

6. — Worthless  claims  to  be  returned  without  charge,  unless  suit 
has  been  ordered  or  some  service  rendered  other  than  the  ordinary 
investigation  and  efforts  to  collect. 

7. — Subscribers  sending  business  to  one  another  will  be  governed 
by  the  above  rules,  except  that  fees  must  be  divided,  one-third  to  party 
sending  and  two-thirds  to  party  receiving  same. 

8. — Where  a  claim  has  been  sent  to  an  attorney  and  any  services 
have  been  rendered,  and  it  is  afterward  settled  by  the  claimant  or 
party  sending  it,  it  shall  be  subject  to  the  same  fees  as  if  collected  by 
such  attorney. 

g. — Where  client  wishes  judgment  for  future  collection,  or  where 
security  is  obtained  by  attorney,  fees  shall  be  as  agreed  upon  between 
the  parties. 

10. — Claims  collected  in  instalments  bear  the  same  rate  of  fees  as 
if  collected  all  at  once,  in  the  absence  of  any  agreement  with  client  to 
the  contrary. 

II. — Subscribers  sending  claims  to  attorneys  make  such  attor- 
neys their  own  agents. 

12. — Any  attorney  receiving  business  from  subscribers  which  he  is 
not  at  liberty  to  attend  to  by  reason  of  being  employed  on  the  other 
side,  or  for  other  good  reasons,  will  return  same  at  once.  If  not  willing 
to  comply  with  these  rules  and  terms,  he  will  return  business  at  once 
to  subscriber. 

13. — If  he  holds  the  claim  he  accepts  these  terms. 


LEGAL   PHASES   OF  COLLECTING  191 

Selection  of  Collection  Attorneys 

Some  attorneys  specialize  on  collections,  and  are  for 
this  reason  better  equipped  to  give  proper  and  systematic 
attention  to  the  accounts  placed  in  their  hands.  The 
younger  attorneys  are  frequently  better  for  collection 
purposes  than  those  of  greater  experience  and  reputation. 
The  younger  men  need  the  money  and  have  a  name  to 
make,  and  for  this  reason  will  follow  a  collection  much 
more  closely  than  is  usual  with  the  older  men. 

Whoever  the  attorney  employed  may  be,  he  should 
be  a  good  one  and  an  honest  one,  and  he  must  receive  an 
adequate  fee  for  his  services.  A  dishonest  or  unscrupu- 
lous lawyer  cannot  be  trusted  with  a  collection.  Such  a 
man  will  sometimes  make  but  little  effort  to  win  his  case 
when  it  is  brought  before  a  justice  of  the  peace  or  in  some 
other  lower  court,  preferring  that  it  should  be  lost  here 
for  the  sake  of  the  prolonged  litigation  and  larger  fees 
involved  in  an  appeal  to  a  higher  court.  Where  there 
is  any  suspicion  that  this  may  be  done,  the  attorney 
should  be  informed  in  advance  that  there  will  be  no  ap- 
peal. Then,  for  the  sake  of  his  fee — if  not  of  his  repu- 
tation— he  will  do  his  best  in  the  one  hearing  which  is 
permitted  him. 

In  choosing  an  attorney  every  care  should  be  exer- 
cised to  avoid  friends  of  the  debtor.  To  this  end,  when 
employing  an  attorney  for  out-of-town  claims,  it  is  some- 
times wise  to  select  one  who,  while  easily  accessible  to 
the  place  of  residence  of  the  debtor,  lives  himself  in  a 
different  place.  It  is  obvious  that  a  friend  of  the  debtor 
would  not  be  likely  to  prosecute  the  claim  as  promptly  and 
forcefully  as  a  stranger  would. 

It  has  already  been  suggested  that  collection  informa- 


192  THE  ART  OF  COLLECTING 

tion  of  much  value  can  frequently  be  secured  from  at- 
torneys. When  an  attorney  furnishes  such  information 
— and  especially  when  he  supplies  it  without  charge — he 
should,  as  a  matter  of  course,  be  given  the  collection  work 
in  his  locality.  It  is  certain  that  the  attorney  who  fur- 
nishes reports  without  charge  is  conferring  a  material 
favor  on  the  collection  manager  and  the  house,  and  is 
entitled  to  any  of  their  business  which  he  can  handle, 
whether  it  be  collections  or  other  legal  work.  It  may  be 
noted  in  passing  that  many  attorneys  contend  that  collec- 
tions do  not  pay  for  the  handling,  and  justify  attention 
only  because  they  lead  to  other  business  which  is  profit- 
able. Be  this  as  it  may,  the  local  attorney  is  one  of  the 
manager's  best  allies;  and,  being  on  the  ground,  and 
knowing  the  conditions  and  the  law  which  controls,  he 
can  give  valuable  information  that  would  be  difficult  for 
the  manager  to  secure  in  any  other  way.  Such  attorneys 
are  therefore  well  entitled  to  anything  the  collection  man- 
ager can  throw  their  way. 

Placing  the  Account  in  the  Attorney's  Hands 

When  an  account  is  placed  in  the  hands  of  an  attorney, 
he  must  be  given  a  full  and  accurate  statement  of  the 
case.  At  the  same  time  any  instructions  necessary  should 
be  given  him  so  clearly  and  specifically  that  there  is  no 
possibility  of  mistake.  If  suit  is  to  be  delayed,  or  not 
to  be  brought  at  all,  or  if  a  compromise  will  be  accepted, 
or  if  there  is  any  other  information  that  may  help  the 
attorney,  all  should  be  plainly  stated.  Thereafter,  any 
information  in  point  which  comes  to  the  collection  man- 
ager should  at  once  be  sent  to  the  attorney.     He  cannot 


LEGAL  PHASES  OF  COLLECTING     193 

act  to  advantage  unless  he  knows  the  facts,  and  all  the 
facts. 

In  the  interchange  of  information  in  regard  to  an 
account,  both  collection  manager  and  attorney  should 
guard  against  misunderstandings,  as  mistakes  might  be 
costly.  Also,  it  should  be  borne  in  mind  that  the  relation- 
ship between  the  attorney  and  the  collection  department  is 
one  of  confidence,  and,  to  be  effective,  there  must  be 
perfect  co-operation  and  fair  dealing  on  both  sides. 

Follow-Ups  for  Attorneys 

Many  attorneys  fail  to  appreciate  the  importance  of 
keeping  the  collection  manager  informed  as  to  what  is 
being  done  with  his  claims.  For  this  reason  he  not  infre- 
quently supposes  that  the  particular  accounts  in  which  he 
is  interested  are  receiving  no  attention,  when  in  fact  the 
attorney  may  be  carefully  following  them. 

Attorneys  are  not,  as  a  rule,  good  men  of  ordinary 
business;  and,  when  they  do  not  report  promptly,  they 
should  be  written  to  and  a  stamped  envelope  be  enclosed 
for  reply.  Frequently  the  attorney's  report  will  be  re- 
turned on  the  back  of  the  letter  which  was  written  him. 
Of  course,  an  attorney  cannot  be  expected  to  give  a 
lengthy,  detailed  report  of  a  small  account,  or  even  of  a 
large  account,  unless  there  is  some  necessity  for  so  doing. 
In  a  few  words,  however,  he  can  tell  enough  to  show  that 
the  account  is  being  given  the  proper  amount  of  attention. 

If  the  attorney  does  not  respond  promptly,  follow-up 
letters  should  be  sent  to  him,  as  suggested  in  Chapter 
XII;  and,  if  these  fail  to  produce  a  response,  the  matter 
should  be  placed  for  investigation  in  the  hands  of  some 
odicr  attorney,  with  a  statement  of  the  facts.     Or,  if  an 


194  THE  ART  OF  COLLECTING 

attorney  is  employed  who  Is  recommended  for  collection 
purposes  by  one  of  the  mercantile  agencies,  the  matter 
can  be  taken  up  with  the  agency.  Attorneys  connected  with 
the  mercantile  or  collection  agencies  are  usually  bonded, 
and  in  such  case  there  is  no  likelihood  of  loss  through 
dishonesty. 

Bringing  Suit 

Where  a  man  has  property  in  his  own  name  subject  to 
execution,  the  collection  of  an  undisputed  account  by  suit 
is  a  simple  matter.  Even  where  a  debtor  has  no  property, 
or  where  his  property  is  exempt  from  execution,  it  is 
frequently  advisable  to  bring  suit.  In  some  cases  the 
debtor  will  pay  up  to  avoid  having  a  judgment  standing 
against  him.  In  other  cases  he  may  be  ignorant  of  the 
law  and  afraid  of  it,  and,  if  he  finds  out  that  suit  has 
really  been  brought  against  him,  will  make  some  settle- 
ment. 

When  suit  is  begun,  it  is  sometimes  wise  to  have  it 
continued  from  time  to  time  so  as  to  tire  the  debtor  out 
or  keep  him  in  a  nervous  state  until  he  will  at  last  make 
payment  for  the  sake  of  peace.  The  plaintiff  may,  of 
course,  discontinue  such  a  suit  at  any  time  If  he  does  not 
think  It  worth  carrying  further,  without  loss  save  for  the 
actual  cost  of  the  proceedings  to  the  point  of  discontin- 
uance. 

All  cases  in  the  same  locality  should  be  brought  be- 
fore the  same  judge  or  justice  of  the  peace,  as  far  ag 
possible.  This  results  in  more  friendly  treatment  and 
smaller  court  costs  than  would  otherwise  be  die  case. 


LEGAL   PHASES   OF  COLLECTING  195 

Statute  of  Limitations 

In  every  state  of  the  Union  is  found  the  "statute  of 
limitations,"  prescribing  a  period  beyond  which  a  debt 
cannot  be  collected  by  legal  procedure.  If  action  is  not 
brought  upon  the  account  within  this  period,  it  is  out- 
lawed— unless  kept  in  good  standing  by  a  payment  or 
other  recognition  on  the  part  of  the  debtor — and  is  not 
recognized  by  the  courts.  The  prescribed  time  varies  in 
the  different  states,  and  also  varies  with  the  nature  of  the 
claim.  An  open  account  expires  by  limitation  in  from 
two  to  eight  years,  according  to  the  state.  For  notes, 
the  period  is  usually  longer.  As  a  general  rule  the  statute 
begins  to  run  from  the  date  of  the  last  payment,  if  the 
account  is  fully  due  at  that  time.  A  written  recognition 
of  the  claim  by  the  debtor  before  the  expiration  of  the 
statutory  time  limit  gives  it  a  new  lease  of  life,  the  statute 
running  from  the  time  of  such  recognition. 

It  is  obvious  that  the  collection  manager  must  watch 
his  accounts  closely  and  revive  the  account  in  some  way, 
or  bring  suit  before  the  expiration  of  the  specified  period, 
or  he  will  be  barred  from  legal  procedure.  Even  a  small 
payment,  if  made  within  the  time  limit,  will  give  the  debt 
new  life,  or,  as  above  stated,  a  written  acknowledgment 
of  the  debt  by  the  debtor,  stating  his  expectation  of  paying 
it,  will  serve  the  same  purpose. 

Ejcemptions 

The  exemption  laws  of  the  various  states  allow  debtors 
to  retain  certain  property  regardless  of  what  they  owe. 
This  is  usually  necessary  property,  such  as  a  certain  por- 
tion of  the  wages  of  an  employee,  the  tools  of  a  car- 
penter  or   mason,    the    homestead   of    a    married   man. 


196  THE  ART  OF  COLLECTING 

Speaking  generally,  no  matter  what  the  conditions,  this 
exempt  property  is  not  liable  for  the  debts  of  its  owner, 
whether  in  the  form  of  a  judgment  or  otherwise.  The 
exact  character  and  the  amount  of  property  which  is  so 
exempt  varies  in  the  different  states. 

Replevin 

With  instalment  houses  a  frequent  means  of  regain- 
ing possession  of  goods  is  by  a  replevin  suit.  This  is  a 
suit  for  recovery,  and  immediate  possession  is  possible 
because  the  title  of  the  goods  is  in  the  seller,  and  he  is 
therefore  allowed,  by  giving  bond,  to  take  the  goods  at 
once  and  hold  them  until  the  case  comes  up  for  trial. 
Many  debtors,  when  goods  are  thus  taken,  do  not  make 
any  further  effort  to  retain  or  regain  them,  and  the  house 
has  possession.  If  the  case  comes  to  trial,  the  seller  can 
show  that  the  debtor  violated  the  terms  of  his  contract 
by  failing  to  make  payments  as  they  fell  due.  This  will, 
in  most  states,  defeat  the  debtor,  but  the  law  varies  so 
greatly  in  the  different  states  that  this  is  not  always  true. 

Garnishment  :  Attachment 

Garnishment  is  a  proceeding  whereby  the  creditor 
stops  payment  of  a  debtor's  salary  or  wage,  this  salary 
or  wage  being  turned  over  in  whole  or  in  part,  according 
to  the  circumstances,  for  the  benefit  of  the  creditor.  A 
portion  of  the  employee's  salary  is  usually  exempt  from 
garnishment,  the  proportion  varying  in  the  different 
states.  The  proceeding,  where  possible,  is  very  effective 
in  forcing  a  debtor  to  settle. 

Attachment  is  a  means  of  preventing  a  debtor  from 
removing  his  property  from  the  state,  or  disposing  of  it 


LEGAL  PHASES  OF  COLLECTING     197 

within  the  state,  after  suit  has  been  instituted  against 
him  for  recovery  of  the  debt.  Attachments  are  usually 
allowed  at  the  time  suit  is  brought,  if  there  is  any  reason- 
able ground  for  believing  that  the  debtor  contemplates 
leaving  the  state  or  disposing  of  his  property.  In  many 
states,  if  the  debtor  attempts  to  abscond,  he  loses  his  right 
of  exemption. 

Judgment  :  Execution 

When  a  claim  is  sued  upon  and  decided  in  favor  of 
the  creditor,  the  award  of  the  court  is  termed  a  "judg- 
ment," and  fixes  the  amount  to  be  paid  by  the  debtor. 
A  judgment  can  be  kept  alive  more  easily  and  for  a  longer 
time  than  can  an  open  account.  Under  proper  proceed- 
ings, property  subject  to  execution  and  belonging  to  the 
debtor  may  be  seized  to  satisfy  a  judgment  at  any  time 
during  its  life. 

An  execution  is  issued  by  the  court  after  judgment 
against  a  debtor  has  been  secured.  It  is  an  order  di- 
recting the  proper  court  official  to  seize  the  property  of 
the  debtor  and  sell  it  to  satisfy  the  judgment  Even 
though  the  property  of  the  debtor  may  be  exempt,  the 
process  is  frequently  effectual  in  bringing  about  a  settle- 
ment. If  an  officer  calls  on  the  debtor  with  the  execution, 
it  usually  has  the  effect  of  frightening  him,  regardless  of 
the  legal  possibilities,  so  that  he  will  make  some  settle- 
ment or  give  security  if  he  cannot  make  payment  at  the 
time. 

Supplementary  Proceedings 

Supplementary  proceedings  are  well  described  in  the 
following  quotation:  "Upon  the  return  of  an  execution, 


198  THE  ART  OF   COLLECTING 

unsatisfied  in  whole  or  in  part,  the  judgment  creditor  may 
procure  an  order  from  the  District  Court,  requiring  the 
judgment  debtor  to  appear  before  the  judge,  or  a  referee, 
and  answer  an  oath,  touching  his  property.  The  debtor 
may  be  restrained,  by  order,  from  interfering  with  or 
disposing  of  his  property,  not  exempt  from  execution, 
during  the  proceedings.  If  there  is  any  danger  of  the 
debtor  leaving  the  state  he  may  be  arrested  upon  a  war- 
rant issued  by  the  judge,  on  proof  of  the  facts. 

"Witnesses  may  be  required  to  appear  and  testify  in 
the  proceedings.  A  receiver  may  be  appointed  with  power 
to  take  property  of  the  debtor,  convert  it  into  money  and 
apply  the  proceeds  on  the  judgment. 

"Disobedience  to  orders  made  in  these  proceedings  is 
punishable  as  contempt.  The  debtor  cannot  be  excused 
from  answering  questions  in  the  examination  on  the 
ground  that  such  answers  would  convict  him  of  the  com- 
mission of  a  fraud." 

Not  infrequently  debtors  are  summoned  to  appear  in 
supplementary  proceedings  after  a  judgment  has  been 
rendered  against  them,  and,  not  realizing  the  gravity  of 
the  proceedings,  fail  to  put  in  an  appearance.  In  such 
case  they  are  in  contempt  of  court,  and  an  officer  is  sent 
to  seize  them  and  throw  them  into  jail.  The  debtor  is 
then  in  a  very  difficult  and  unpleasant  position,  and  either 
he  or  his  friends  will  almost  always  raise  the  money  to 
pay  the  debt,  if  it  is  in  any  way  possible,  in  order  to  secure 
his  discharge. 

Imprisonment  for  Debt 

Speaking  generally,  imprisonment  for  debt  is  a  thing 
of  the  past     It  is  not  favored  by  the  law;  and  almost 


LEGAL   PHASES   OF  COLLECTING  199 

the  only  grounds  which  are  now  recognized  as  sufficient 
for  a  debtor's  imprisonment  are  fraud,  or  a  behef  that 
the  debtor  is  about  to  leave  the  state.  This  position 
shows  the  changes  that  are  constantly  taking  place  in  the 
law  and  the  general  progress  of  civilization. 

Suggestions  for  the  Collection  Manager 

When  selling  on  contracts  of  conditional  sale,  the  law 
of  the  particular  state  in  which  the  sale  is  made  must  be 
consulted  as  to  the  force  and  form  of  such  a  contract, 
and  the  method  of  filing  or  recording;  and  these  require- 
ments must  be  followed  to  the  letter.  This  is  also  true 
when  selling  under  chattel  mortgage.  If  the  proper  pre- 
cautions are  not  taken,  the  whole  aim  and  purpose  of  the 
procedure,  i.  e.,  to  hold  the  property  as  security  for  the 
debt,  is  thwarted. 

When  selling  to  a  corporation,  it  should  always  be 
remembered  that  the  stockholders  are  rarely  liable  for 
the  corporate  debts.  If  their  stock  is  not  full-paid,  they 
are  liable  for  such  debts  up  to  the  balance  unpaid  on  their 
stock;  but,  if  tlie  stockholder  has  once  paid  for  his  stock, 
or  if  he  has  bought  it  from  someone  else  in  good  faith 
as  "full-paid"  stock,  he  can  no  longer  be  held  for  the  debts 
of  the  corporation.  This  rule  obtains  in  practically  every 
state  of  the  Union.  In  a  partnership,  on  the  other  hand, 
each  member  is  liable  for  any  debts  contracted  by  the 
firm  up  to  the  full  amount  of  his  personal  property.  The 
firm  property  must,  of  course,  be  exhausted  before  the 
personal  property  is  levied  upon,  but  the  individual  prop- 
erty of  the  partners,  as  well  as  the  firm  property,  stands 
behind  the  partnership  debts. 

The  time  for  filing  a  claim  against  the  estate  of  a 


200  THE  ART  OF  COLLECTING 

deceased  person  varies  In  different  states;  and  for  this 
reason,  if  the  collection  manager  has  such  a  claim,  he 
should  either  file  it  at  once  or  consult  the  statutes  as  to 
the  time  in  which  it  may  be  filed. 

Books  of  account,  to  be  competent  as  evidence,  must 
be  books  of  original  entry.  This  means  that  the  entries 
must  be  made  direct  and  not  be  copied  from  other  books 
or  memoranda.  If  entries  are  first  made  on  a  slip  and 
then  copied  from  this  slip  to  the  books,  the  books  them- 
selves are  not  books  of  original  entry  and  cannot  be  used 
as  evidence.  If  such  slips  have  been  used  and  then  thrown 
away,  there  are  no  books  of  original  entry;  and  the  de- 
tails of  any  transactions  involved  must  be  proved  by 
personal  evidence  or  in  such  other  way  as  may  be  possible. 

Journals  and  day-books  are  usually  books  of  original 
entry.  Ledgers,  if  their  postings  are  taken  from  other 
books,  are  not.  The  collection  manager  should  be  careful 
that  his  books  are  kept  in  such  shape  that  they  are  avail- 
able for  court  purposes  when  necessary. 

If  a  check  or  draft  taken  in  payment  of  an  account  is 
drawn  on  a  bank  or  party  in  the  same  city  in  which  the 
payee  has  his  office,  it  must  be  deposited  or  presented 
for  payment  on  the  day  it  is  received,  or,  at  the  latest, 
the  day  following.  If  it  is  drawn  on  a  bank  in  another 
city,  it  must  be  deposited  for  collection  within  the  same 
period.  If  this  is  not  done,  the  payee  is  negligent,  and 
if  the  bank  or  party  on  whom  the  Instrument  Is  drawn 
fails  before  the  check  or  draft  comes  in,  the  loss  falls 
on  him. 

Frequently  It  Is  possible  for  a  debtor,  if  the  pressure 
is  severe,  to  secure  some  friend  or  relative  to  guarantee 
payment  of  his  debt    In  such  case  the  collection  manager 


LEGAL  PHASES  OF  COLLECTING    201 

must  bear  in  mind  that  the  guarantee  is  absolutely  value- 
less unless  it  is  in  writing. 

Law  for  the  Collection  Manager 

The  collection  manager  should  study  the  bankruptcy 
law  carefully,  as  delinquent  debtors  are  very  apt  to  go 
into  bankruptcy;  and  he  must  then  know  what  to  do  in 
order  to  secure  proper  consideration  for  his  claims. 
When  the  amount  is  large,  he  will  usually  employ  an 
attorney  to  represent  him,  but  for  small  accounts  he 
should  be  able  to  make  the  proper  affidavits  and  file  his 
claim  himself. 

The  subject  of  contracts  is  of  continuing  importance 
to  the  collection  manager.  Nearly  every  business  dealing 
is  founded  on  a  written  or  oral  contract,  and  the  collec- 
tion manager  must  have  a  fair  knowledge,  at  least,  of  the 
law  of  contracts  if  he  is  to  handle  his  work  intelligently. 
Any  of  the  better  works  on  commercial  law  treat  the  sub- 
ject of  contracts  in  considerable  detail. 

The  law  of  negotiable  instruments  should  also  be 
given  close  study.  Originally  founded  on  the  Law  Mer- 
chant, i.  e.,  the  custom  of  merchants  which  had  come  into 
general  use  and  had  been  accepted  by  the  courts,  the  law 
of  negotiable  instruments  is  now  statute  law  in  most  of 
the  states,  and  is  uniform  in  its  main  details  in  the  ma- 
jority of  them.  The  statute  is  an  important  one  for  the 
collection  manager,  as  the  instruments  he  deals  in  most 
frequently,  such  as  checks,  drafts  and  notes,  must  be  cor- 
rectly worded  and  properly  drawn  to  make  them  nego- 
tiable; and  the  requirements  as  to  endorsements  and  as 
to   presenting  and  protesting  must  be   followed   to   the 


202  THE  ART  OF  COLLECTING 

letter,  in  order  to  hold  the  various  endorsers  and  insure 
payment. 

The  collection  manager  will  also  find  a  general  study 
of  commercial  law — sufficient  to  give  him  the  ordinary 
everyday  requirements  of  business  procedure  from  the 
legal  standpoint — very  helpful  in  his  work. 

Suggestions  to  Delinquent  Debtors 

In  writing  letters  and  sending  statements  to  delinquent 
debtors,  it  is  not  uncommon  to  print  short,  pertinent  state- 
ments at  the  top  or  bottom  of  the  sheet.  These  are  of 
such  a  nature  as  to  cause  the  debtor  to  think,  and  not  in- 
frequently to  act.  When  used  with  discretion,  and  only 
where  they  are  needed,  they  are  advantageous.  Some  of 
these  endorsements  are  as  follows : 

"It  is  common  law,  existing  in  every  state,  that  any  person  or 
persons  receiving  any  article  or  articles  and  making  use  of  same 
are  liable  for  payment." 

"No  responsible  man  will  allow,  and  a  poor  man  cannot  afford, 
to  have  judgments  and  costs  rendered  against  him.  The  proper 
time  to  make  defense  or  settle  an  account  is  before  the  case  gets 
into  court     When  once  judgment  is  entered,  defenses  are  barred." 


CHAPTER  XVII 

Mercantile  and  Collection  Agencies 

Mercantile  Agencies 

The  mercantile  agency  is  an  evolution — the  natural 
outgrowth  of  the  demand  among  merchants  for  exact 
information  regarding  the  financial  standing  of  their  cus- 
tomers. The  first  agency  in  this  country  dates  back  to 
1840,  when  a  number  of  merchants  in  New  York  City 
organized  for  the  purpose  of  interchanging  credit  and 
other  trade  information.  At  the  present  time  there  are 
two  mercantile  agencies  of  national  prominence  in  this 
country — Bradstreet's  and  Dun's.  There  are  numerous 
smaller  organizations  confined  to  special  trades  or  lines 
of  business  or  to  limited  territory.  The  predominant  pur- 
pose of  all  these  is  the  gathering  and  dissemination  of 
credit  information. 

The  two  national  agencies  mentioned  have  wide- 
spread and  effective  organizations,  with  offices,  repre- 
sentatives or  correspondents  in  every  part  of  the  country, 
and  in  practically  every  important  city  of  the  world.  They 
furnish  credit  information  in  regard  to  any  mercantile  per- 
son, or  subject,  resident  in  the  United  States  or  Canada,  or 
residing  in  any  part  of  the  civilized  world. 

Mercantile  Rating  Books 

The  mercantile  agency  is  sustained  by  subscriptions 
from  its  clientele.     The  two  general  agencies,  mentioned 

203 


204  THE  ART  OF  COLLECTING 

above,  publish  quarterly  reference  or  rating  books  in  Jan- 
uary, April,  July  and  October.  For  the  use  of  books  em- 
bracing the  entire  country,  and  the  supplying  of  a  limited 
number  of  special  reports,  the  subscription  rate,  or  fee, 
required  by  these  agencies  is  $ioo  and  upwards  per  an- 
num. This  includes  the  use  of  semi-annual  editions,  an 
extra  charge  being  made  for  quarterly  volumes.  For 
such  service  in  but  a  portion  of  the  United  States,  the 
western  states  only,  for  instance,  the  annual  fee  is  slightly 
less,  and  a  proportionately  lower  charge  is  made  for  extra 
copies  of  the  rating  book.  Additional  special  reports  over 
and  above  the  number  agreed  to  be  supplied  for  the  mini- 
mum subscription  fee  just  referred  to,  may  be  contracted 
for  by  the  hundred,  the  price  depending  upon  the  kind  or 
class  of  reports  wanted.  Inasmuch  as  the  changes  in  rat- 
ing average  over  3,000  a  day,  this  frequent  replacement 
of  the  reference  book  is  desirable  where  late  information 
is  advantageous. 

The  reference  books  issued  by  the  Bradstreet  and 
Dun  agencies  are  very  comprehensive  volumes,  covering 
the  entire  country.  They  are  supposed  to  contain  the 
name  of  every  individual,  every  partnership  and  every 
corporation  in  the  United  States  and  Canada  doing  an  in- 
dependent business  of  a  nature  and  of  a  sufficient  volume 
to  be  of  interest  from  the  credit  standpoint.  For  each 
individual  or  concern  rated  they  give  the  place  and  the 
nature  of  the  business,  the  estimated  worth,  and  the  gen- 
eral credit  standing.  The  ratings  and  the  lines  of  business 
of  the  parties  whose  names  appear  are  indicated  by  letters, 
numbers  and  symbols,  the  meaning  of  these  being  ex- 
plained by  a  "key"  in  the  front  of  the  book.  For  each 
state  the  names  are  arranged  under  the  city  or  town  of 
residence,  and  under  this  place  of  residence,  alphabetically. 
The  volumes  also  contain  at  the  end  of  each  state  a  map 


MERCANTILE  AND  COLLECTION  AGENCIES    205 

of  the  state,  a  list  of  its  more  prominent  banks  and 
bankers,  and  an  abstract  of  the  collection  laws  which 
obtain  in  that  state. 

The  information  upon  which  the  reference  books  are 
based  is  primarily  obtained  from  the  rated  parties  them- 
selves. For  this  purpose  reporters  are  sent  out  to  inter- 
view them ;  and  blanks  are  left  with  them  to  be  filled  out. 
The  questions  appearing  on  these  blanks  are  exhaustive 
and  very  searching  in  their  nature,  and,  if  properly  an- 
swered, give  a  very  good  basis  for  credit  rating.  Where 
the  rating  is  an  important  one,  the  information  fur- 
nished by  the  party  himself  is  usually  verified  from  other 
sources. 

The  reference  books  published  by  the  agencies  are 
merely  loaned  to  subscribers,  remaining  the  property  of 
the  concern  by  which  they  are  published,  to  be  returned 
to  it  when  a  new  book  is  sent  out  to  replace  the  old,  or 
at  the  expiration  of  the  subscription  term  if  the  subscriber 
does  not  renew.  Each  subscriber  signs  a  contract  with 
the  agency,  in  which  he  agrees  to  conform  to  its  rules, 
and  among  other  provisions  to  treat  all  its  information  as 
strictly  confidential.  The  agencies  do  not  consider  them- 
selves responsible  for  the  ratings  appearing  in  the  refer- 
ence books,  and  require  that  the  information  in  them  shall 
be  held  in  confidence  and  shall  be  used  only  by  the  sub- 
scribers. 

Special  Reports 

For  any  ordinary  credit  purpose  the  information  given 
in  the  agency  reference  books  of  late  issue  is  suflicient.  For 
instance,  if  a  wholesale  merchant  receives  an  order  for  a 
small  bill  of  goods  from  an  out-of-town  customer,  and 
wishes  to  know  whether  this  customer  is  a  good  risk,  he 


2o6  THE  ART  OF   COLLECTING 

turns  to  his  reference  book  for  the  rating.  If  he  finds  the 
prospective  customer  has  a  fair  and  good  credit,  he  is 
usually  satisfied  and  sends  the  goods  along.  If,  however, 
he  does  not  find  his  customer  in  the  rating  book,  or  if  the 
amount  involved  is  so  large  that  he  thinks  further  in- 
formation is  desirable,  he  applies  for  a  special  report. 

The  special  report  goes  into  much  detail,  giving  every- 
thing that  can  be  discovered  which  affects  the  credit  stand- 
ing of  the  party  under  inquiry.  Such  a  report  usually 
tells  how  long  the  party  has  been  in  business,  the  busi- 
ness or  businesses  he  has  been  and  is  connected  with,  the 
amount  of  his  capital,  any  mortgages  or  other  recorded 
liens  on  his  property,  his  reputation  for  paying  bills, 
important  facts  in  his  history  that  would  throw  light  on 
his  general  character,  and  any  other  details  that  might 
prove  of  value  in  determining  the  credit  to  which  he  is 
entitled. 

The  agencies  have  this  information  on  file  for  all  the 
better-known  business  men  and  concerns  of  the  country. 
When  a  special  report  is  applied  for,  if  the  name  of  the 
person  or  concern  inquired  about  does  not  appear  in  their 
files,  or  if  they  do  not  have  the  required  information,  or 
if  their  information  is  not  recent,  they  make  an  investiga- 
tion. The  special  reports  furnished  in  answer  to  inquiries 
are  held  to  be  confidential,  and  the  agency  does  not  regard 
itself  as  responsible  for  their  correctness,  merely  under- 
taking to  secure  the  most  reliable  information  it  can  and 
passing  this  on  to  the  party  who  asks  for  the  report. 

When  a  special  report  is  called  for,  the  agencies  utilize 
the  information  on  file  as  far  as  available.  If  none  is 
found  on  file,  or  if  the  information  on  file  is  not  adequate 
or  not  of  late  date,  a  reporter  is  sent  out  to  secure  such 
information  as  he  can  in  regard  to  the  person  inquired 


MERCANTILE  AND  COLLECTION  AGENCIES    207 

about.  The  party  himself  is  usually  approached  for  a  state- 
ment of  his  financial  condition.  The  reporter  then  seeks 
confirmation  by  interviewing  people  to  whom  the  party 
should  be  known,  particularly  those  with  whom  he  has,  or 
has  had,  business  dealings.  Beyond  this,  when  occasion 
requires,  he  examines  the  county  records  to  see  what  real 
property  stands  in  the  party's  name,  and  to  see  if  there  are 
any  encumbrances  against  it. 

The  agencies  are  frequently  criticized  as  to  the  time 
taken  to  supply  reports,  as  to  the  errors  which  do  at  times 
occur  in  these  reports,  and  as  to  their  cost.  When, 
however,  we  consider  the  complexity  of  the  system,  the 
exacting  requirements,  and  the  careful  and  rather  delicate 
work  involved,  the  reports  are  usually  as  prompt  and 
accurate  as  could  be  expected,  and  the  cost  moderate. 

Trade  and  Local  Mercantile  Agencies 

There  are  a  large  number  of  small  agencies  confining 
their  operations  to  particular  localities  or  to  particular 
trades.  These  smaller  agencies,  while  frequently  useful  to 
the  collection  manager,  do  not  cover  the  territory  nor  have 
the  facilities  of  the  larger  agencies,  and  for  this  reason, 
where  any  considerable  volume  of  business  is  transacted, 
and  particularly  where  the  business  is  national  in  its  char- 
acter, the  services  of  the  larger  agencies  are  necessary. 
The  collection  manager  will  frequently  find  the  services  of 
a  local  or  trade  agency  advantageous  as  supplementing 
the  information  of  the  larger  agencies. 

Collection  Agencies 

The  collection  agency  is  a  concern  making  a  specialty 
of  collecting  debts,  and  more  particularly  those  debts 
which    the    collection    manager    cannot    himself    collect. 


2o8  THE  ART  OF  COLLECTING 

It  might  perhaps  be  said  with  more  accuracy  that  the 
collection  agency  is  an  institution  for  the  collection  of  bad 
debts.  It  is  but  seldom  that  the  ordinary,  easily  collectible 
account  is  given  to  a  collection  agency. 

The  better  class  of  collection  agencies  are  reliable, 
fairly  efficient,  employ  good  attorneys,  and  transact  a  large 
volume  of  business.  Small  accounts  not  paid  under  ordi- 
nary pressure  are  habitually  placed  for  collection  with  the 
collection  agency.  Many  houses,  when  a  larger  account 
becomes  difficult,  or  when  suit  is  to  be  brought,  place  the 
matter  with  such  an  agency  in  preference  to  handling  it 
themselves.  Then,  if  suit  is  brought,  the  onus,  in  part 
at  least,  falls  upon  the  agency.  The  suit  is  not  brought 
directly,  and,  if  the  debtor  complains  to  the  house,  it  is 
always  possible — if  desirable — to  sympathize  with  him, 
explain  that  the  agency  has  gone  further  than  was  in- 
tended, and  that  the  concern  will  be  glad  to  settle  direct 
with  the  customer  and  "leave  the  agency  out  in  the  cold." 
This  is,  of  course,  entirely  metaphorical,  as  the  agency 
gets  its  commission  no  matter  whether  settlement  is  made 
through  it  or  made  direct;  but  the  idea  is  soothing  to  the 
injured  feelings  of  the  debtor,  and  is  at  times  effective. 

As  stated,  the  accounts  placed  in  the  hands  of  agencies 
are  usually  those  which  have  proved  too  difficult  for  the 
collection  manager,  or  which,  for  special  reasons,  it  is 
inadvisable  for  him  to  handle.  In  most  cases,  whatever 
is  realized  from  such  accounts  is  just  that  much  gained. 
If  the  collection  agency  returns  a  claim  as  uncollectible, 
it  can  be  placed  in  the  hands  of  some  other  agency,  or,  if 
thought  best,  transferred  to  a  suspense  account  to  await 


MERCANTILE  AND  COLLECTION  AGENCIES    209 

some  change  in  the  debtor's  affairs  which  will  give  it 
value. 

Accounts  placed  with  a  collection  agency  are  usually 
on  a  commission  basis.  Where  the  amounts  involved  are 
moderate,  this  commission  is  usually  10  per  cent,  with 
a  minimum  charge  of  from  $1  to  $3.  It  is  needless  to 
say  that  the  status  of  the  agency  should  be  determined 
before  accounts  are  placed  in  its  hands.  It  may  be  even 
Ijiarder  to  collect  a  debt  from  an  unreliable  agency  than 
from  a  poor-pay  customer. 

When  a  claim  is  placed  in  the  hands  of  an  agency  it 
not  infrequently  happens  that  the  debtor  calls  or  sends 
in  and  pays  the  account  direct.  In  this  case  the  agency 
is  entitled  to  its  commission,  which  is  but  fair,  as  its 
efforts  drove  the  debtor  to  pay  his  account 

Methods  of  Collection  Agencies 

As  stated,  the  collection  agency  usually  takes  accounts 
on  a  commission  basis.  If  it  is  necessary  to  bring  suit, 
the  agency  usually  requires  the  party  placing  the  account 
with  it  to  pay,  or  guarantee,  the  costs.  Commissions  and 
any  costs  paid  by  the  agency  are  deducted  from  the  pro- 
ceeds of  the  collection  before  any  payment  is  made  to  the 
party  to  whom  the  claim  belongs. 

The  collection  agencies  are  very  direct  in  their 
methods.  The  good-will  of  a  customer  is  eliminated  from 
their  consideration,  and  they  do  not  attempt  in  any  way 
to  mask  or  soften  their  demands  for  money.  Their  let- 
ters are  to  the  point  and  very  little  delay  is  tolerated.  It 
is  said  that  collection  agencies  secure  at  least  50  per  cent 
of  the  total  amount  they  collect  as  a  result  of  their  first 
letter. 


2ro  THE  ART  OF   COLLECTING 

Some  agencies  furnish  blanks  or  form  letters  for  use 
by  their  clients.  A  small  charge  is  usually  made  for  these 
blanks,  which,  though  purporting  to  be  sent  out  by  the 
collection  agency,  are  in  reality  filled  in  and  sent  out  by 
the  collection  manager  or  his  concern.  Such  communi- 
cations usually  demand  payment  in  no  uncertain  tone,  and 
request  that  this  payment  be  made  at  the  subscriber's 
office. 

Letters  of  this  nature  are  frequently  effective.  They 
are  advantageous  as  enabling  the  house  to  hide  behind 
the  name  of  the  agency,  thereby  gaining  a  double  end: 
first,  the  house  does  not  directly  affront  its  customer  by 
the  somewhat  emphatic  demand  for  money,  and,  on  the 
other  hand,  it  gets  the  added  weight  of  the  agency  name. 
If  this  first  "effort"  does  not  produce  results,  the  claim 
is  then  usually  turned  over  to  the  agency  for  direct  and 
more  active  effort. 

Other  collection  agencies  furnish  drafts  for  the  us,e 
of  their  customers.  On  these  are  printed  instructions 
notifying  the  bank  presenting  the  draft  to  forward  the 
claim  to  the  agency  in  case  the  draft  is  not  honored.  This 
plan  is  often  successful  in  producing  results,  but  deter- 
mines in  advance  that  the  claim  is  to  be  placed  in  the 
hands  of  the  agency  if  the  draft  is  not  paid.  If  the 
draft  is  paid,  the  agency  sometimes  receives  a  small 
commission,  though  it  usually  relies  for  its  compensation 
on  an  annual  charge  for  its  services,  or  on  a  small  charge 
for  the  drafts,  or  perhaps  depends  entirely  for  its  com- 
pensation on  the  business  which  comes  into  its  hands 
through  these  drafts.  ^ 

Under  another  plan,  a  contract  is  signed  between 
the  agency  and  the  merchant,  by  which  the  agency  agrees 


MERCANTILE  AND  COLLECTION  AGENCIES    211 

to  collect  the  merchant's  accounts  on  the  basis  of  a  speci- 
fied commission,  plus  ten  cents  on  each  claim,  paid  in 
advance,  to  cover  postage.  The  usual  terms  of  such  a 
contract  require  that  the  claims  placed  with  the  agency 
must  aggregate  $25  or  more,  the  commission  varying 
with  the  total  amount  turned  over  for  collection.  Under 
this  plan  the  merchant  is  in  a  way  guaranteeing  the 
agency  a  certain  amount  of  business.  The  amount  re- 
ceived for  postage  usually  goes  to  the  solicitor  who  se- 
cures the  contract  for  the  agency,  and  forms  part  of 
his  commission.  The  full  amount  of  the  solicitor's  com- 
mission depends  on  the  size  of  the  contract  which  he 
writes  with  the  merchant. 

This  contract  plan  is  said  to  have  merit,  and  may  be 
advantageous  under  some  circumstances.  As  a  rule, 
however,  the  usual  plan  of  a  contingent  fee  on  whatever 
business  is  placed  with  the  agency  is  better,  as  here  the 
merchant  is  not  obliged  to  place  any  definite  amount  of 
business  with  the  agency,  has  the  privilege  of  withdrawing 
a  claim,  and  pays  nothing  until  something  worth  while  has 
actually  been  accomplished. 


CHAPTER  XVIII 
Unusual  Collection  Methods 

No  matter  how  careful,  how  cautious,  how  capable 
the  credit  man;  no  matter  how  experienced,  how  resource- 
ful, how  persuasive  the  collection  manager — there  always 
will  be  some  bad  debts.  Sometimes  conditions  change 
after  credits  are  granted.  Sometimes  the  credit  man  is 
the  victim  of  circumstances  or  of  deliberate  schemes  to 
gain  credit.  Sometimes,  apparently,  the  very  character 
of  the  debtor  changes,  and  the  man  who  has  been  noted 
for  promptness  of  payment  becomes  poor  pay. 

The  ordinary  debtor  will  usually  succumb  to  ordinary 
collection  methods.  The  extraordinary  debtor  requires 
something  more  forceful.  There  is,  of  course,  always 
the  debtor  who  cannot  pay  just  simply  because  he  has 
not,  and  cannot  get,  the  money  to  pay,  and  with  whom 
ordinary  or  extraordinary  collection  methods  avail  noth- 
ing. The  majority  of  those  who  fail  to  pay  their  debts 
are  not,  however,  of  this  class,  but  are  just  plain  dead- 
beats  who  are  trying  to  get  something  for  nothing.  In 
such  cases  almost  any  device  within  the  limits  of  the  law 
is  justifiable. 

Some  of  these  devices  are  not  entirely  nice.  There 
are  unpleasant  elements  in  the  collection  business.  The 
collector  of  bad  debts  cannot  be  too  squeamish,  and  must 
at  times  be  even  hard-hearted,  or  else  be  unfaithful  to 

2U 


UNUSUAL   COLLECTION   METHODS         213 

his  trust  As  a  rule,  however,  the  collection  of  the  debts 
usually  denominated  uncollectible  is  not  a  matter  of  hard- 
heartedness.  It  is  merely  a  matching  of  wits  between  the 
collection  manager  and  the  delinquent  debtor. 

The  methods  of  collecting  discussed  in  this  chapter 
may  be  classed  as  unusual  or  special  methods.  Not  all  of 
them  are  intended  for  the  very  hard  cases.  The  telephone 
call,  credit  threats,  the  follow-up  draft,  instalment  col- 
lections, and  others,  are,  in  fact,  of  but  little  avail  in  diffi- 
cult cases.  The  majority  of  the  plans  suggested  are,  how- 
ever, what  might  be  described  as  emergency  methods — 
methods  to  be  tried  when  all  others  faiL 

The  Telephone  Call 

The  telephone  call  is  a  comparatively  mild  collection 
measure — good  for  the  ordinary  slow  account,  but  of  little 
avail  for  really  hard  cases  because  of  the  facility  with 
which  the  debtor  may  shut  off  its  importunities  when  they 
become  annoying.  For  the  ordinary  overdue  account, 
however,  its  effect  is  as  good  as  a  personal  interview.  In- 
deed, when  the  telephone  message  comes  from  one  of  the 
more  important  officers  of  the  concern  it  may  be  even 
better,  as  having  greater  weight  than  the  personal  call 
of  a  collector,  who  at  the  best  is  but  a  subordinate. 

The  telephone  call  is  not  always  available.  There 
must  first  be  a  telephone  through  which  the  debtor  may 
be  reached,  and,  second,  there  must  be  a  certain  willing- 
ness on  his  part  to  listen,  or  an  ability  on  the  part  of  the 
other  party  to  compel  him  to  listen,  as  otherwise  the 
debtor  will  bring  the  conversation  to  an  abrupt  conclusion 
by  hanging  up  the  receiver. 

The  telephone  call  may  be  used  at  any  stage  of  a 


214  THE  ART  OF  COLLECTING 

collection,  serves  as  a  convenient  reminder  on  the  due 
day  of  an  account  if  a  remittance  does  not  come  in 
promptly,  and  is  equally  available  if  the  matter  has 
dragged  along  for  months  with  promises  broken,  letters 
unanswered  and  collections  practically  defied.  The  mat- 
ter can  be  discussed  over  the  telephone  with  all  the  free- 
dom of  a  personal  interview.  An  explanation  of  the 
delay  may  be  asked,  the  importance  of  prompt  payment 
be  urged,  and  the  whole  matter  gone  into  with  as  much 
detail  as  the  circumstances  seem  to  warrant.  Persuasion, 
entreaty,  and  even  abuse  may  be  used.  Matters  that 
could  not  be  written  without  danger  of  a  suit  for  libel, 
or  blackmail,  may  safely  be  talked  over  the  telephone. 

It  is  easy,  under  such  circumstances,  to  make  a  very 
strong  appeal  for  money  without  possibility  of  offense — 
an  appeal  which  the  debtor  will  find  it  difficult  to  resist. 
Here,  however,  comes  in  the  great  defect  in  a  telephone 
collection  call:  the  money  cannot  be  secured  then  and 
there.  The  debtor's  mind  may  be  brought  up  to  the 
point  of  payment;  the  most  sincere  promises  may  be  se- 
cured; but  the  actual  immediate  money  cannot;  and  this 
must  await  the  chilling  effect  of  the  debtor's  sober  sec- 
ond thought.  If  the  debtor  has  been  brought  to  the 
paying  point  the  collection  manager  may,  of  course,  sug- 
gest sending  at  once  for  the  money;  but,  if  this  is  not 
feasible  or  not  acceptable  to  the  debtor,  he  must  await 
a  remittance — a  remittance  which  may  be  long  in  coming. 

The  Registered  Letter 

Where  a  delinquent  debtor  pays  no  attention  to  let- 
ters and  is  not  accessible  to  personal  calls  or  telephone 
communication,  the  registered  letter  may  occasionally  be 


UNUSUAL  COLLECTION    METHODS         215 

used  to  good  effect.  This  letter  calls  attention  to  the 
fact  that  other  letters  have  not  been  answered,  or  states 
the  condition  of  the  account,  with  any  other  details  or 
circumstances  which  may  assist  the  collection. 

The  effectiveness  of  the  registered  letter  is  due  to 
its  semi-official  character.  Registry  is  formal  and  un- 
usual; and  when  the  delinquent  debtor  receives  a  regis- 
tered letter  in  reference  to  his  account  he  will,  in  most 
cases,  conclude  that  the  matter  is  becoming  serious,  and 
that  there  must  be  more  to  it  than  appears  on  the  sur- 
face. He  knows  that  the  letter  was  registered,  and  that 
he  has  signed  a  receipt  for  it,  but  does  not  know  why 
this  was  done,  or  what  use  is  to  be  made  of  the  receipt. 
His  imagination  is  then  apt  to  prove  a  valuable  ally 
for  the  collection  manager. 

It  is  always  a  distinct  point  gained  when  a  delin- 
quent debtor  can  be  brought  into  personal  touch,  and 
into  a  formal  recognition  of  the  fact  that  his  debt  exists; 
and  this  the  registered  letter  will  in  most  cases  bring 
about. 

The  Telegram 

In  any  written  communication  relating  to  an  indebted- 
ness much  care  must  be  taken,  as  already  stated,  to  avoid 
liability  under  the  laws  against  libel  and  blackmail.  Any- 
thing written  is  in  black  and  white;  and,  if  it  steps 
beyond  the  limits  of  the  law,  the  sender  has  himself  sup- 
plied proof  for  his  own  conviction. 

This  caution  is  still  more  imperative  with  regard  to 
an  open  communication,  such  as  a  telegram,  than  with 
a  letter,  for  here  the  lines  are  much  more  closely  drawn. 
The  telegram  is  in  a  sense  public  property;  and  about 


2i6  THE  ART  OF  COLLECTING 

all  that  can  safely  be  brought  into  it  is  an  inquiry  as  to 
when  a  remittance  may  be  expected. 

If,  however,  the  telegram  is  used  at  the  proper  time, 
it  is  sometimes  very  effective,  weak  though  its  wording 
must  be.  Perhaps  a  special  letter  has  been  written, 
strongly  urging  payment  of  the  account  in  whole  or  in 
part.  The  telegram  may  then  be  used  as  a  follow-up, 
though  in  form  perhaps  merely  a  reminder,  such  as: 
"Wrote  you  on  the  25th.  When  may  we  expect  a  re- 
mittance?" Or  it  is  sometimes  used  effectively  where  a 
delinquent  debtor  has  sent  in  a  bill  for  further  goods, 
when  a  telegram  goes  forward:  "Order  received.  We 
cannot  ship  until  payment  has  been  made  on  overdue 
account.  When  will  you  remit?  Answer."  Or  the  tele- 
gram may  be  used  independently,  as:  "We  must  have  $50 
today.    Can  you  send  it?    Answer." 

In  any  of  these  cases  the  telegram  undoubtedly  does 
have  an  "urgent"  effect.  The  fact  that  it  is  ordinarily 
used  only  for  emergency  business  of  an  immediate  or 
exceptionally  important  nature  gives  it  more  weight  than 
other  forms  of  communication  possess.  The  cost  is  small, 
and,  if  there  is  any  prospect  of  its  producing  results,  it 
may  well  be  tried. 

Follow-Up  Drafts 

It  has  already  been  suggested  that  in  cases  where  the 
creditor's  draft  is  returned  unpaid,  a  second  draft  may 
be  sent  out  immediately,  and  will  occasionally  produce 
results.  It  should  be  accompanied  by  a  letter  from  the 
creditor,  mentioning  the  return  of  the  first  draft,  and 
taking  for  granted  that  this  was  due  to  some  misunder- 
standing on  the  debtor's  part.     This  is  desirable,  first  as 


UNUSUAL   COLLECTION    METHODS  217 

giving  opportunity  for  some  good  collection  talk,  and 
second  to  prevent  any  misapprehension  on  the  debtor's 
part  that  the  second  demand  Is  merely  an  accidental  repe- 
tition of  the  first.  Such  a  letter  will  also  impress  the 
debtor  with  his  creditor's  persistence;  and  this  effect  of 
harrassing  persistency  Is  Increased  by  sending  the  second 
draft  to  a  different  bank,  as  the  debtor  then  feels  himself 
attacked  on  all  sides,  and,  being  uncertain  as  to  how  far 
this  process  may  be  carried,  fears  the  effect  on  his  credit 
— if  he  has  any. 

Instalment  Collections 

An  overdue  account  may  sometimes  be  secured  piece- 
meal when  It  cannot  be  secured  "in  bulk."  In  cases  of 
this  kind,  where  the  debtor  is  either  unable  or  unwilling 
to  pay  the  full  amount,  the  collector  may  suggest  that 
payment  be  made  on  the  instalment  plan.  His  argument 
for  this  course  has  no  weight  with  the  professional  dead- 
beat;  but  with  the  ordinary  debtor  who  is  merely  in  a 
hard  place,  it  Is  sometimes  very  effective.  He  suggests 
that  the  full  amount  Is  more  than  the  debtor  can  be  ex- 
pected to  pay  at  one  time,  but  that,  of  course,  he  wishes 
to  clear  off  the  troublesome  indebtedness  as  soon  as  he 
can,  and  that  a  payment  of,  say  $1  a  week,  or  so  much  a 
month,  or  any  other  arrangement  that  may  suit  the  partic- 
ular case,  would  be  the  proper  way  to  meet  the  obligation. 
This  suggestion,  if  tactfully  made,  and  adapted  to  the  cir- 
cumstances of  the  debtor,  will  frequently  be  successful. 

Offer  of  Concession 

A  method  somewhat  akin  to  the  foregoing,  and  some- 
times employed  with  success,  is  to  make  a  concession  for 


2i8  THE  ART   OF  COLLECTING 

immediate  payment.  In  such  case,  the  collector  pleads 
a  special  emergency  requiring  cash — so  pressing  an  emer- 
gency that  it  must  be  had  at  any  cost,  and  therefore  his 
concern  is  willing  to  settle  up  the  present  indebtedness  for 
a  sum  so  much  below  the  full  amount  due  as  to  make  the 
proposition  attractive.  When  this  is  done,  it  gives  the 
collector  a  new  argument,  i.  e.,  the  benefit  to  the  debtor. 
"Here,"  he  says,  "is  an  opportunity  to  clear  off  this  long 
outstanding  and  troublesome  indebtedness  for  but  a  por- 
tion of  its  real  amount.  It  is  in  fact  a  bargain  offering. 
Here  is  a  $25  indebtedness  that  may  be  settled  with  a  $20 
bill.     How  could  $5  be  made  more  easily?" 

The  money-saved  argument  has  no  weight  with  the 
"deadbeat"  debtor  who  is  trying  to  avoid  payment  of  the 
whole;  but  with  those  who  really  intend  to  pay  at  some 
future  time,  it  is  usually  effective,  though  a  bad  precedent 
to  establish. 

Discounted  Notes 

It  is  a  fact  that  a  bank  can  secure  payment  of  a  claim 
where  an  individual  or  a  firm  cannot,  as  its  semi-public 
position  gives  it  much  greater  weight  than  appertains  to 
individuals  and  ordinary  business  concerns.  If,  therefore, 
a  claim  is  in  the  form  of  a  note,  or  can  be  placed  in  the 
form  of  a  note,  and  this  note  is  discounted  or  deposited 
with  the  bank  for  collection,  it  is  more  likely  to  be  paid 
than  if  left  in  the  form  of  a  bill,  or  presented  by  the 
individual  or  concern  to  whom  it  was  given. 

It  is  frequently  possible  to  secure  a  note  in  settlement 
of  a  claim  when,  at  least  for  the  time,  it  is  absolutely  im- 
possible to  secure  cash.  This  note  is  more  likely  to  be 
paid  than  the  open  account;  and,  if  it  is  deposited  with 


UNUSUAL   COLLECTION    METHODS         219 

the  bank  for  discount  or  collection,  the  chances  for  pay- 
ment are  better  still. 


Credit  Threats 

In  collection  work  threats  must  be  used  with  much 
discretion,  or  they  may  involve  the  creditor  in  very  un- 
pleasant legal  entanglements.  The  credit  threat,  how- 
ever, is  hardly  of  this  class.  In  this  case  the  creditor 
writes  stating  that  he  is  a  member  of  some  credit  asso- 
ciation, which  requires  its  members  to  report  all  bad  debts. 
He  therefore  finds  himself  in  an  embarrassing  position, 
as  he  does  not  want  to  report  his  customer,  and  yet  fears 
trouble  with  the  association  if  he  does  not,  the  debt  having 
run  so  long.  He  may  touch  incidentally  upon  the  dis- 
agreeable results  for  the  debtor  if  this  report  is  made — 
not  in  a  threatening  way,  but  merely  as  a  matter  of  fact 
in  connection  with  the  operations  of  his  credit  association. 
Under  these  circumstances  he  asks  the  debtor  to  come  to 
their  mutual  relief  with  a  payment.  The  method  is 
frequently  successful,  though  not  recommended. 

The  Black  List 

This  is  similar  to  the  credit  threat.  A  personal  letter 
is  written  to  the  debtor,  stating  the  amount  overdue,  and 
informing  him  that  the  writer  is  getting  out  a  "black 
list"  for  the  mercantile  reporting  agency,  that  he  feels 
sure  that  the  debtor  does  not  wish  his  name  to  be  included 
in  this  list,  and  that  he  therefore  trusts  the  debtor  will 
remit  at  once  in  settlement  of  his  account.  This  will  often 
be  effective,  as  the  debtor  naturally  does  not  wish  to  go 
on  record  as  a  bad  credit  risk,  and  does  not  know  how 
widely  his  delinquencies  may  be  published  if  he  refuses 


220  THE  ART  OF  COLLECTING 

to  settle.  On  the  other  hand,  the  plan  must  be  used  with 
caution,  as  in  some  states  the  law  in  regard  to  collection 
of  debts  is  so  strict  that  such  threats  are  blackmail,  and 
render  the  user  liable  to  heavy  penalties. 

Sending  Out  the  Boss 

This  method  is  somewhat  akin  to  that  of  the  collec- 
tion letter  signed  by  the  president  or  other  high  official 
of  the  concern,  used  as  having  greater  weight  than  the 
ordinary  communication.  A  call  is  made  by  one  of  the 
proprietors  or  officials  of  the  concern.  The  method  is, 
of  course,  available  only  where  the  debtor  is  reasonably 
close  at  hand  and  accessible  to  personal  calls,  and  where 
the  amount  is  sufficient  to  justify  the  effort. 

If  the  creditor  concern  is  a  partnership,  one  of  the 
partners  goes  out,  or  someone  else  well  up  in  the  counsels 
of  the  firm;  if  a  corporation,  one  of  the  higher  officials 
makes  the  call.  In  either  case,  the  effect  is  entirely  dif- 
ferent from  that  produced  when  a  collector  calls.  The 
proprietor  or  the  official  of  the  concern  cannot  be  treated 
like  an  ordinary  collector.  He  carries  a  weight  and  an 
influence  that  is  very  effective,  and,  if  he  is  at  all  tactful 
and  able,  his  call  will  usually  produce  payment,  or,  if 
payment  cannot  be  had  then,  will  establish  relations  and 
an  understanding  of  the  conditions  that  will  eventually 
result  in  payment. 

Turning  Accounts  Into  Judgments 

An  open  account  expires  aftesr  a  certain  time,  the 
period — fixed  by  statute — varying  widely  in  the  different 
states.  The  statute  begins  to  run  from  the  time  the  debt 
is  incurred,  or,  if  there  have  been  payments  upon  it,  from 


UNUSUAL   COLLECTION   METHODS         221 

the  time  of  the  last  payment.  If,  therefore,  payments — 
even  very  small  ones — can  be  secured  from  time  to  time, 
there  is  no  danger  of  the  claim  expiring  by  limitation.  If, 
however,  no  payment  or  written  recognition  of  the  debt 
can  be  secured,  suit  should  be  brought  before  the  time  of 
expiration. 

When  suit  is  brought  and  judgment  obtained,  this 
judgment  has  a  life  of  its  own,  also  fixed  by  statute,  and 
varying  in  the  different  states;  and  the  claim  is  secure  for 
this  period. 

Occasionally,  where  suit  might  be  embarrassing  to 
the  debtor,  and  he  is  willing  to  acknowledge  service  of 
notice,  though  he  is  not  willing  or  not  able  to  pay  the  ac- 
count, suit  is  begun;  but  after  service  has  been  obtained 
on  the  defendant,  the  matter  is  allowed  to  drift  along. 
In  this  way  an  account  may  be  kept  alive  for  years;  In 
fact.  It  does  not  expire  by  limitation,  and  can  be  brought 
to  a  conclusion  only  by  the  debtor's  appeal  to  the  courts 
for  a  dismissal.  Under  such  an  arrangement,  the  creditor 
can  appear  in  court  at  any  time,  show  that  the  long-con- 
tinued suspension  of  proceedings  was  by  mutual  consent, 
and  proceed  with  his  suit. 

Writing  to  Friends 

Writing  must  be  indulged  in  with  discretion  when  the 
collection  of  debts  Is  the  subject  matter.  When,  how- 
ever, a  delinquent  debtor  refuses  to  answer  communica- 
tions, and  the  creditor  concern  has  or  can  secure  the  ad- 
dresses of  friends,  references  or  connections  of  the  debtor, 
it  is  sometimes  very  effective  to  intimate  to  him  that, 
if  no  response  is  received  to  the  letter,  the  concern  will 


222  THE  ART  OF  COLLECTING 

write  to  one  or  more  of  these  persons — merely,  of  course, 
to  secure  information  as  to  the  debtor's  whereabouts. 

This  will  often  bring  a  reply;  but,  if  it  fails  to  do 
so,  it  is  then  entirely  allowable  to  write  to  these  other 
parties,  stating  that  the  delinquent  is  indebted  to  the  con- 
cern, that  letters  written  to  him  have  received  no  attention, 
and  asking  for  information  as  to  his  whereabouts.  This 
proceeding  may  bring  a  certain  amount  of  pressure  to 
bear  upon  the  debtor  which  will  lead  to  payment  of  his 
account.  It  may  happen,  also,  that  friends  or  relatives 
will  pay  such  an  account  themselves,  rather  than  allow 
the  matter  to  become  public — and  this  is  especially  likely 
if  the  debtor  has  resorted  to  underhanded  or  fraudulent 
means  of  evading  payment. 

As  an  instance  of  the  successful  use  of  this  method, 
the  case  may  be  cited  of  a  western  music  house  which  sold 
a  piano  on  the  instalment  plan,  securing  itself  by  chattel 
mortgage.  The  instalments  were  paid  in  whole  or  in 
part  for  a  few  months,  when  it  was  discovered  that  the 
customer — who  was  a  woman — had  borrowed  $ioo  on 
the  piano,  giving  a  chattel  mortgage  to  secure  the  loan; 
and  that  this  second  chattel  mortgage  had  been  placed 
on  record,  thus  taking  precedence  of  the  purchase  money 
mortgage,  which  had  not  been  placed  on  record. 

The  customer's  act  was,  of  course,  fraudulent,  and 
might  have  been  made  a  very  serious  matter  for  her, 
but  this  would  not  have  saved  the  music  house  from  loss. 
The  collection  manager  had,  however.  In  the  course  of 
the  transaction,  secured  the  address  of  the  lady's  mother, 
and  at  this  juncture  telegraphed  her  to  come  at  once,  as 
her  daughter  was  In  serious  trouble.  The  telegram  was 
signed  with  the  name  of  the  music  house.     The  mother 


UNUSUAL   COLLECTION    METHODS         223 

came,  called  at  the  music  house,  and,  after  the  serious 
nature  of  her  daughter's  offense  had  been  explained,  paid 
the  $100  which  had  been  borrowed  on  the  piano,  and 
the  instrument  was  thereupon  returned  to  the  firm. 

The  Awkward  Call 

This  is  an  unpleasant  but  frequently  effective  method 
of  collecting  bad  accounts.  A  festivity  is  perhaps  in 
progress  at  the  debtor's  house.  The  collector,  having 
ascertained  this  fact,  calls,  inquires  for  the  debtor,  and, 
if  he  can  secure  an  entry,  presents  his  account  and  insists 
on  payment.  The  debtor  naturally  demurs.  The  col- 
lector insists  more  urgently  and  more  loudly;  the  attention 
of  the  guests  is  attracted;  and  the  debtor  naturally  finds 
the  situation  very  embarrassing.  If  he  be  strong  of  mind 
and  muscle  he  will  occasionally  make  it  embarrassing  for 
the  collector,  and  add  to  his  friends'  entertainment  by  a 
number  not  scheduled  on  the  original  program.  Barring 
such  unhappy  incidents,  however,  the  final  result  of  the 
call  depends  entirely  upon  the  ability  of  the  collector  and 
the  financial  resources  of  the  debtor.  If  the  collector  is 
persistent,  and  refuses  to  be  daunted  by  threats  or  cajoled 
by  promises,  the  money,  in  whole  or  in  part,  is  very  apt 
to  be  forthcoming. 

The  collector  may  vary  this  proceeding  in  several 
ways.  He  may  present  his  bill  when  the  victim  is  attend- 
ing an  entertainment  in  the  house  of  a  friend,  or  he  may 
interrupt  him  in  the  middle  of  an  important  business  in- 
terview. If  the  debtor  is  an  employee,  the  presentation 
of  the  bill  at  his  place  of  employment  may  be  resorted 
to,  but,  as  this  might  result  in  the  employee's  discharge 
and  thus  incapacitate  him  from  paying  the  debt,  a  threat 


2  24  THE  ART  OF   COLLECTING 

of  resorting  to  this  measure  may  be  more  effective  than 
its  actual  fulfilment. 


The  Sweating  Process 

This  is  another  variation  of  the  awkward  call,  and 
requires  a  collector  of  good  conversational  powers,  con- 
siderable nerve,  and,  preferably,  some  physical  ability. 
He  calls  with  the  overdue  account  at  the  debtor's  house, 
and  simply  stays  there  until  he  gets  his  money,  or  becomes 
convinced  that  no  money  is  to  be  had.  As  may  be 
imagined,  the  process  is  a  disagreeable  one  for  both  col- 
lector and  debtor.  Argument,  persuasion,  threats,  and 
discussion  are  all  used  according  to  the  conditions,  until 
either  collector  or  debtor  becomes  exhausted  and  gives  up. 

This  method,  of  course,  requires  some  judgment  in  its 
use,  and  is  available  only  with  a  certain  class  of  accounts; 
but  with  these  it  is  very  effective. 

Combining  Accounts 

Sometimes,  when  a  single  account  is  too  small  to 
justify  the  creditor  in  taking  legal  action,  he  may  get 
other  creditors  of  the  particular  delinquent  to  join  issues, 
so  that  the  combined  amount  is  enough  to  justify  such 
action  as  may  seem  best.  As  debtors  of  the  "deadbeat" 
class  will  owe  money  in  many  different  quarters,  this  is 
usually  a  simple  and  very  possible  plan,  and  is  sometimes 
productive  of  excellent  results. 

Garnishment  Proceedings 

It  very  frequently  happens  that  the  debtor  has  con- 
cealed property,  debts  owing  to  him,  or  perhaps  wages 
due  him;  and,  if  these  can  be  discovered,  garnishee  pro- 


UNUSUAL   COLLECTION    METHODS         225 

ceedings  may  enable  the  creditor  to  liquidate  his  account. 
The  method  is  one  requiring  some  detective  ability  in 
tracing  the  property  or  debts  of  the  delinquent,  and  also 
a  certain  degree  of  acquaintance  with  the  law  of  the  par- 
ticular state;  but  it  is  frequently  productive  of  results. 

Its  possibilities  are  illustrated  by  the  case  of  a  doctor 
in  very  excellent  practice,  who  had  money,  but  did  not 
consider  it  necessary  to  use  this  to  pay  his  debts.  The 
doctor  owed  $75  to  a  medical  supply  house,  which  the 
concern  was  entirely  unable  to  collect,  and  they  finally 
placed  the  matter  in  the  hands  of  a  collection  agency. 
After  a  study  of  the  conditions,  a  representative  of  the 
agency  called  on  the  doctor  in  the  character  of  a  patient, 
and  after  the  consultation  pulled  out  his  pocket-book  to 
pay  the  doctor's  fee,  but  on  looking  into  it  found  that  he 
had  not  the  necessary  amount  with  him.  Accordingly  he 
asked  the  doctor  for  a  blank  check,  and  when  this  was 
furnished,  he  filled  the  check  in  properly,  inserting  the 
name  of  his  own  bank,  and  turned  it  over  to  the  doctor 
in  payment.  He  had,  of  course,  noted  the  name  of  the 
doctor's  bank,  and  on  garnisheeing  this  bank  it  was  found 
that  the  debtor  had  a  deposit  there  of  over  $600.  The 
collection  was  made  without  further  trouble. 

Supplementary  Proceedings 

When  a  claim  has  been  turned  into  a  judgment,  the 
debtor  may,  in  most  states,  be  brought  before  the  court 
on  supplementary  proceedings,  and  be  forced  to  make  a 
full  disclosure  of  his  financial  condition.  It  is  but  seldom 
that  a  debtor,  especially  a  "deadbeat,"  is  actually  penni- 
less, or  unable  to  secure  money;  and  these  supplementary 
examinations  may,  on  occasion,  be  made  so  searching  and 


226  THE  ART  OF  COLLECTING 

so  disagreeable  that  he  will  choose  payment  of  the  debt 
as  the  lesser  evil.  They  sometimes  reveal  facts  not  only 
embarrassing  but  incriminating,  or  of  such  a  nature  as 
would  prevent  the  debtor's  discharge  in  bankruptcy  pro- 
ceedings if  he  should  at  any  time  wish  to  resort  to  them. 
A  small  account  is,  of  course,  not  worth  following  so 
far;  but  where  large  amounts  are  involved,  a  rigorous 
examination,  perhaps  repeated  from  time  to  time,  is  worth 
while,  and  is  frequently  productive  of  results. 


APPENDIX 

Collections  and  Credits  from  the  Credit  Man's 
Standpoint* 

Collections  and  How  to  Handle  Them 

(Article  I) 

By  John  L.  Bergman,  of  Pass  &  Seymore,  Inc., 
Solvay,  N.  Y. 

The  collection  of  accounts  is  the  test  of  credits.  A 
credit  manager's  judgment  is  vindicated,  in  extending  a 
doubtful  credit,  provided  he  can  collect  the  account;  and 
a  good  collector  can  do  this  if  he  has  properly  established 
the  extent  of  the  risk  taken  in  extending  credit. 

A  good  collector  is  a  combination  of  nearly  all  the 
requirements  which  make  the  live  business  man.  He  must 
be  resourceful  in  methods,  diplomatic,  courteous,  and 
withal  capable  of  drastic,  kind,  severe,  generous,  relent- 
less or  amiable  moods,  in  fact,  of  every  temperament  that 
fits  the  particular  requirements  of  the  task  in  hand, 
when  he  undertakes  to  separate  his  debtors  from  their 
money. 

A  method  that  works  well  with  one  debtor  may  fall 
flat  with  another.  A  method  that  builds  business  through 
courtesy  and  kindness  with  one  man  may,  with  another, 
result  In  loss  of  money.  Therefore  permit  me  to  say 
with  emphasis,  "Know  your  debtor." 

•  The  entire  material  of  this  appendix  is  talien  by  permission  from  Um 
Bulletin  of  the  National  Association  of  Credit  Men. 

227 


228  THE  ART   OF   COLLECTING 

To  know  the  debtor,  the  credit  man  should  have  oc- 
fore  him,  so  that  he  may  see  it  at  a  glance  when  he  writes 
his  customer  requesting  payment  of  his  account,  all  there 
is  to  know  relative  to  the  latter's  financial  responsibility 
and  integrity;  also  a  history  of  the  business  conducted 
by  him,  and  of  his  rise  and  fall  from  a  business  viewpoint. 

This  may  be  acomplished  by  the  use  of  cards,  size 
five  by  eight  inches  being  most  convenient  (see  accom- 
panying form).  Use  one  side  of  the  card  for  complete 
credit  information  and  the  other  for  collection  record. 
These  cards  should  be  kept  alphabetically  arranged  in  a 
cabinet  consisting  of  four  drawers,  labeled :  Prospective, 
Active,  Collection,  and  Inactive. 

Some  credit  systems  involve  so  much  writing  and 
duplication  of  work  as  to  render  their  use  burdensome. 
To  avoid  that  objection  was  the  purpose  I  had  constantly 
in  mind  in  originating  the  system  I  am  about  to  describe. 

Most  business  houses  send  out  their  statements  at  the 
end  of  each  month.  When  these  end-of-the-month  state- 
ments reach  the  credit  department  the  credit  record  card 
for  each  is  removed  from  the  drawer  labeled  "Active," 
the  amount  of  the  account  recorded  thereon  by  months, 
and  the  card  placed  on  the  credit  manager's  desk  with 
the  statement  and  file  of  correspondence. 

Statements  covering  accounts  not  due  are  placed  in  a 
mailing  basket  to  be  posted  without  comment.  Accounts 
due  are  accompanied  by  a  courteous  letter  requesting 
verification,  or  urging  that,  if  there  be  any  errors,  the 
house  be  notified  at  once,  so  that  the  matter  may  be  in- 
vestigated and  proper  adjustment  made. 

The   credit  manager   need   only  mark   opposite   the 


APPENDIX 


229 


account  written  about,  the  date  and  character  of  the 
letter  written.  When  their  letters  come  to  the  credit  de- 
partment for  signature,  the  cards  are  returned  with  them, 
and  are  then  filed  chronologically  in  the  drawer  labeled 
"Collection,"  behind  monthly  and  daily  guides,  so  that 
they  will  receive  attention  at  the  proper  time. 

A  notation  is  made  on  the  card  each  time  a  letter  is 
sent,  and  if  answers  are  received  and  promises  of  re- 
mittance made,  that  information  is  recorded,  and  the  card 
filed  ahead  to  the  correct  date. 

As  the  letters  of  the  alphabet  are  printed  at  the  top 
of  each  card,  and  adjustable  guide  placed  over  the  letter, 
the  firms  whose  names  begin  with  the  same  letter  are  in 
a  line,  and  any  card  desired  may  be  located  instantly. 

Every  morning  the  cards  which  should  have  attention 
on  that  day  are  sent  to  the  accounts  department,  where 
remittances  received  or  credits  allowed  are  recorded 
thereon.  The  cards  are  then  passed  on  to  the  filing  de- 
partment, where  the  file  is  taken  out  as  in  the  beginning, 
and  placed  upon  the  credit  manager's  desk. 

In  case  the  account  has  been  paid  since  the  first  letter, 
the  card  is  immediately  returned  to  the  credit  department, 
and  filed  in  its  proper  place  for  reference  and  further  use. 

Should  remittance  or  response  fail  to  put  in  an  ap- 
pearance within  a  reasonable  number  of  days,  another 
letter  is  written  drawing  attention  to  the  overdue  account 
and  unanswered  letter.  This  second  letter  is  written  with 
the  inference  that  there  is  undoubtedly  some  good  reason 
for  the  delay;  and  it  requests  that,  if  this  delay  is  caused 
by  any  matter  in  connection  with  which  the  house  may 
render  assistance,  there  be  no  hesitancy  in  taking  it  up  at 
ouce. 


230  THE  ART  OF  COLLECTING 

This  usually  brings  an  answer;  but  should  it  be  ig- 
nored, a  third  letter  Is  written  In  which  the  customer  is 
told  that,  failing  to  hear  from  him,  anxiety  is  felt  lest  he 
be  experiencing  some  serious  crisis  in  his  business;  and 
he  Is  urged  to  write  a  letter  of  assurance  so  that  the  matter 
may  not  continue  a  subject  of  concern. 

Failing  to  receive  answer  to  this  communication,  an- 
other is  written  In  which  It  is  stated  that  draft  will  be 
made  at  a  near  date  through  the  customer's  own  bank, 
but  the  date  Is  put  far  enough  forward  to  give  the  cus- 
tomer a  chance  to  prevent  the  sending  of  a  draft.  If  he 
does  not  make  any  response,  the  draft  is  made;  and  the 
same  day  a  letter  goes  to  the  erstwhile  customer  telling 
him  of  the  action,  asking  payment  of  the  draft  as  soon 
as  presented,  and  hinting  that  should  It  be  returned  dis- 
honored we  may  be  compelled  to  resort  to  measures 
which  might  engender  unpleasantness. 

Not  until  all  this  falls  is  the  account  placed  with  an 
attorney,  whereupon  the  records  on  the  white  card  are 
transferred  to  a  pink  card  worded  and  arranged  precisely 
like  the  white  one  (see  accompanying  forms),  which 
constantly  warns  the  credit  manager  that  he  has  had 
trouble  with  the  account  The  pink  card  stands  as  a  per- 
petual danger  signal.  The  amount  is  charged  to  "Sus- 
pense Account,"  and  the  card  held  to  follow  the  attorney. 

This  system  brings  to  notice  each  day  those  accounts 
that  should  receive  attention,  and  reduces  by  one-half  the 
labor  of  collecting.  It  works  automatically,  and  takes 
care  of  the  detail  work  connected  with  the  collection  de- 
partment, with  very  little  demand  upon  the  credit  man- 
ager's personal  attention. 


APPENDIX 


Zj.1  -  co/i  p 


\T7t>yo^i>Cr'C^    CJ^^^^.    ^ 


SUCCEEDINQ 


//,(Z.,S 


»    SZZi.^'yx^ 


*'Cy>rt^ 


a^l<^'yi^ 


^^€>^.,oJtL<^rt. 


^^Ji^. 


231 

Ofl  -     «  , 


STATEMENT 


'//3 


FIRM  MEMBERS 


LMBERS  ' 


ANNUAL  BUS. 


4^  i  ^^ 


//,a..s. 


St^-^Lyyy^ 


t*^>y^ 


-    <«o  /v\ 


8 


^.  o. 


?yi/^.  Mo.^'    S^uJtZf 


^j4.y 


V.P. 


LIABILITIES 


EST!.  NET  WORTH 


SPEC.  REPO 


7-!^^-  /X^  .-UuU  ■  '^<jU<  cm  ^ 


INSURANCE 


"y^XJO^.    CL9n^  -  Ci/uixJut  CUaA^    AV'yy^. 


2M-em  :Xo^< 


^Z^'?rU^  JUjbtJti  '^jjjmnj  -  tm  ^trvcJi  AC>K  j^  GxJ*.  ^Cn.  Jja 
njkAtxAJCf.  ///  /oG-'B-  7l»  e^^i^pyu^  -  /^fUtiJl  /:Jlcx^    -fi^cuL^ 

ti  eta    Afi  v&fce        yyof-SJtoLnj\.-A^r^c^  ^    /fea^»>^ 

^REFE^ENy^^^  £g  ^^  a  'See^xyj^  -Jo  -/»^c  /ro  ■3J^^t^.atA^  ^ 


ATTY, 

CMsa  swspeNCE, 

CHSO.  P.  4  L.                                               '            '                      " 

OVCT 

Xzus  Side  op  Card  for  Credit  I ^f form atioh. 


232 


THE  ART  OF  COLLECTING 


Jfias  Side  of  Card  for  Collectiok  Record. 


Collections  and  How  to  Handle  Them 

(Article  II) 

By  John  S.  McCay,  of  Welsbach  Co.,  Philadelphia,  Pa. 

Prompt  collections  are  a  vital  feature  of  business,  for 
no  matter  how  great  the  volume  of  sales,  the  profits  will 
not  be  in  equal  ratio  unless  collections  are  kept  up  to  a 
standard  consistent  with  the  volume  of  business  done. 
Profits  in  merchandising  are  made  by  quick  turnovers  of 
capital;  but  unless  collections  are  promptly  made,  turn- 
overs cannot  be  had  as  frequently  as  they  should  be. 

Interest  on  capital  consumed  by  bills  being  paid  sixty 
to  ninety  days  after  they  fall  due  instead  of  on  their  due 
dates,  is  an  item  of  importance,  so  that  prompt  collec- 
tion of  accounts  receivable  is  a  matter  which  needs  careful 
attention.  It  enables  the  executive  head  of  the  business 
to  take  advantage  of  discounts  in  paying  bills,  and  affords 
him  an  opportunity  to  branch  out  and  secure  larger  re- 
turns on  capital  invested. 

The  interest  of  the  manufacturer  or  merchant  in  col- 
lections is  not  confined  merely  to  his  own  business,  but 
to  the  business  of  his  customers  as  well,  especially  those 
seeking  credit.  Customers  having  an  excessive  amount 
of  outstanding  accounts  based  on  yearly  sales  will  likely 
be  slow  pay,  and  in  some  cases  dangerous  risks.  A  cus- 
tomer who  keeps  accounts  collected  closely  will  be  more 
likely  to  discount  bills  from  profits  made,  instead  of  an- 

333 


234  THE  ART  OF  COLLECTING 

ticipating  profits,  as  is  frequently  done  where  purchases 
are  made  on  extended  terms. 

Each  month  in  any  business  an  estimate  should  be 
made  covering  cash  that  should  be  collected,  in  order  to 
give  the  collection  department  a  definite  objective.  The 
estimate  is  to  be  based  on  the  outstanding  accounts  for 
the  corresponding  month  of  the  previous  year,  collections 
for  same  month,  the  balance  outstanding  at  the  time  of 
estimate,  and  existing  conditions  of  the  present  year,  for 
which  previous  month  is  used  as  a  guide.  This  works  out 
on  a  percentage  basis,  allowance  being  made  for  probable 
increased  or  decreased  results  according  to  indications  of 
the  previous  month. 

Each  month  a  collection  comparison  is  made  with  the 
corresponding  period  of  the  previous  year,  by  taking  the 
balance  of  the  accounts  receivable  on  the  first  of  each  of 
the  two  fiscal  years,  adding  to  each  balance  the  sales  to 
date  for  the  respective  years,  and  dividing  each  into  total 
collections  to  date  for  each  year.  This  shows  how  col- 
lections compare  with  the  previous  year  on  a  percentage 
basis. 

After  statements  are  made  up  they  are  placed  on  the 
desk  of  the  credit  manager,  who  communicates  with  the 
debtors  whose  accounts  require  attention.  Communica- 
tions regarding  accounts  of  customers  are  filed  in  a  folder 
with  credit  information  pertaining  to  them,  thus  giving 
a  complete  history  of  the  accounts.  The  credit  folder 
bears  the  same  number  as  the  customer's  account,  as  a 
result  of  which  the  card  index  for  accounts  Is  also  an 
Index  for  credit  Information  files. 

To  follow  up  letters  the  Credit  Man's  Diary  is  used, 
memoranda  being  made  under  the  date  on  which  cor- 


APPENDIX  235 

respondence  is  to  be  brought  out.  A  memorandum  of 
the  date  placed  in  the  diary  is  placed  on  the  copy  of  the 
letter  written  the  debtor,  so  that  should  it  come  out  by 
payment  or  otherwise  before  that  date,  the  diary  is  turned 
to  and  the  memorandum  crossed  off,  being  no  longer 
needed.  This  plan  works  automatically,  making  it  un- 
necessary for  the  credit  manager  to  tax  his  memory  with 
details;  it  also  keeps  his  desk  clear  of  matters  of  this 
character. 

Every  ten  days,  or  as  frequently  as  necessary,  the 
ledgers  are  gone  over  to  note  the  condition  of  each  ac- 
count. Account  cards  are  carried  in  trays,  and  such 
accounts  as  should  be  noted  by  the  credit  manager  are 
automatically  brought  to  his  attention  by  standing  them 
on  their  sides,  so  they  will  appear  above  the  other  ac- 
counts; and  the  tray  is  then  placed  on  his  desk  in  order 
that  he  may  go  over  the  cards  and  give  each  such  attention 
as  is  needed.  This  also  reduces  the  work  of  the  credit 
man. 

Many  concerns  have  found  that  the  collector  does  not 
accomplish  as  much  as  correspondence,  as  he  often  has  to 
make  several  calls  before  seeing  the  proper  party,  whereas 
letters  usually  reach  the  desired  destination. 

It  has  been  found  advisable  to  avoid  using  printed 
or  typewritten  forms  in  series;  a  debtor  who  has  once 
gone  through  this  process  knows  as  much  about  it  as  you 
do,  and  will  wait  until  the  last  form  is  received  before 
giving  the  matter  serious  consideration. 

Collection  letters  should  be  short  and  diplomatically 
worded  in  order  not  to  offend  the  debtor,  for  it  is  hard 
to  accomplish  anything  when  he  gets  into  a  disturbed 
frame  of  mind. 


236  THE  ART  OF  COLLECTING 

Where  extensions  are  asked,  it  is  usually  advisable 
to  grant  them,  provided  you  are  convinced  it  is  desirable, 
but  they  should  be  made  in  the  form  of  interest-bearing 
notes.  If  the  account  is  large  it  is  better  to  take  several 
notes  falling  due  successively,  rather  than  one  note  for 
the  entire  amount,  risking  chances  of  its  not  being  paid 
at  maturity. 

Optimism  is  a  necessary  adjunct  to  the  collection  de- 
partment. It  is  unwise  to  feel  an  account  will  be  lost 
simply  because  it  has  become  slow,  or  has  assumed  larger 
proportions  than  the  responsibility  of  the  debtor  seems 
to  warrant.  If  the  credit  manager  becomes  pessimistic, 
the  chances  are  that  recipients  of  his  letters,  who  are 
already  discouraged  on  account  of  adversity,  may  take 
on  an  additional  amount  of  pessimism  and  be  fit  subjects 
for  bankruptcy. 

It  is  frequently  advantageous  to  attach  the  stamp  of 
the  Credit  Men's  Association  to  letters  of  the  collection 
department.  This  shows  the  debtor  with  bad  intentions 
that  his  creditor  is  a  member  of  that  organization,  and 
he  assumes  that  the  member's  collection  experience  will 
likely  be  furnished  to  other  inquiring  members. 

When  an  account  is  placed  with  an  attorney  the  credit 
folder  containing  all  information  regarding  it  is  taken  out 
of  the  credit  information  file  and  placed  in  a  vertical  file 
containing  accounts  in  the  hands  of  attorneys,  the  account 
card  of  the  customer  being  marked  "No  further  credit." 
A  large  red  "'A"  is  also  placed  on  the  account,  indicating 
that  it  is  in  the  hands  of  an  attorney. 

The  folders  are  filed  numerically,  original  card  of 
customer  still  serving  as  an  index  by  marking  it 
/'Attorney's  File," 


Collections  and  How  to  Handle  Them 

(Article  III) 

By  Leon  Joseph,  of  Wilmerding-Loewe  Co., 
San  Francisco,  Cal. 

Collecting  in  person  in  home  cities  or  towns  where 
the  creditor's  business  is  located,  collecting  by  traveling 
men,  collecting  through  the  mails,  and  with  the  aid  of 
attorneys  or  collection  agencies — such  are  the  various 
methods  of  handling  collections. 

Personal  collecting  is  almost  altogether  a  matter  of 
individuality.  Good  collectors  can  handle  each  phase  of 
a  case  as  it  presents  itself,  just  as  the  traveling  men  who 
are  entrusted  with  collections  can  oftentimes  protect  the 
house  in  profit  and  loss  accounts  by  taking  quick  legal 
action  when  they  are  on  the  ground.  Yet  the  long-distance 
method  is  the  only  one  used  by  a  great  majority  of  busi- 
ness concerns,  and  among  the  various  reasons  for  its 
use,  not  the  least  is  the  difficulty  of  obtaining  men  who 
are  good  salesmen  and  collectors  combined. 

Few  office  managers  care  to  hand  accounts  to  attorneys 
or  collection  agencies;  but  this  step  must  be  considered 
when  discussing  "handling  collections,"  for  the  phrase  is 
really  synonymous  with  "getting  the  money";  and  that 
process  very  often  calls  for  the  assistance  of  the  law. 

Let  me  now  present  the  mechanical  methods  men- 
tioned, in  order  to  give  a  full  and  accurate  grasp  of  the 

237 


238  THE  ART  OF  COLLECTING 

various  steps  pertaining  to  prompt  and  efficient  collecting. 
These  steps  I  have  divided  into  seven  parts,  as  follows : 

1.  Sending  statements  when  accounts  are  due  (to  se- 
cure uniformity,  sending  them  on  the  first,  or  first  and 
fifteenth). 

2.  Second  statement  to  follow  in  fifteen  days,  marked 
"Second  Statement" 

3.  If  statements  remain  unheeded,  a  letter  is  to  be 
written  calling  attention  to  the  two  statements  previously 
sent,  and  asking  for  a  remittance. 

4.  Second  letter  is  sent  if  the  account  is  still  unpaid. 
Refer  to  first  letter  and  advise  that  if  account  remains 
unpaid  in  ten  days  a  draft  will  be  drawn. 

5.  Above  date  arriving,  and  payment  still  not  made, 
the  draft  is  drawn  through  bank  or  express  company, 
accompanied  by  letter  asking  protection  for  same. 

6.  If  draft  is  unpaid  and  returned,  write  letter  re- 
viewing general  facts  in  case  and  steps  taken  to  collect, 
and  advise  that  account  must  positively  be  settled  by  re- 
turn mail,  or  other  and  stronger  steps  will  be  taken  to 
force  collection. 

7.  No  answer  to  the  last  letter  being  forthcoming, 
advise  that  account  will  be  handed  to  an  attorney  for 
enforcement  of  collection  if  not  settled  within  certain 
period  (making  allowance  for  mailing  time  to  and  from 
customer). 

To  keep  track  of  these  various  steps  use  the  following 
form  of  daily  reminder  book,  so  ruled  that  the  names  of 
parties  to  whom  the  various  letters  are  to  be  written  are 
placed  in  the  numbered  columns  corresponding  to  the 
above  schedule: 


APPENDIX 

COLLECTION  DIARY 

February  25,  191 — 


239 


3 

4 

5 

6 

7 

Posted  to  record 
book  for  accounts 
given  to  attorney 
for  collection. 

Page 

In  conjunction  with  this  schedule  use  the  following 
ruled  book  for  all  accounts  placed  in  the  hands  of  an 
attorney  or  collection  agency  for  settlement: 

RECORD  BOOK  FOR  ACCOUNTS  GIVEN  TO  ATTORNEYS 
FOR  COLLECTION 


Name  of  account Name  of  attorney 

Location Location 

Date  of  placing  account. 
Transcript  from  Ledger  Legal  steps  taken 


Manner  of  settlement  of  account. 


Date  of  settlement 

Expenses  attached  to  settlement. 
Per  cent,  received  on  account.... 


There  can  be  no  set  form  given  for  the  letters  written 
in  connection  with  the  above.  In  order  to  be  effectual, 
each  letter  must  of  necessity  be  one  that  will  reach  the 
mind  and  the  pocket  of  the  particular  man  addressed. 


240 


THE  ART  OF  COLLECTING 


The  following  form  of  ledger  ruling  will  greatly  as- 
sist in  putting  the  office  manager  in  possession  of  all  the 
steps  taken  in  handling  collections  on  any  particular 
account : 

APPROVED  FORM  OF  LEDGER  RULING,  WITH  SPECIAL 
COLUMN  FOR  COLLECTION  DATA 


Account  No.  34.  Dun 

Name — James  Watertown.  Bradstreet. 

Address — Waverly,  Tex.  Reports 

Terms — Net,  30  days.     Limit — $400. 


Coll. 

Date 

Dr. 

Cr. 

Bal. 

Coll. 

Date 

Dr. 

Cr. 

S.  3/10/ 10 
2  S.  4/10/10 

1910 
Feb.    I 
Feb.  15 

90.00 
81.00 

90.00 
171.00 

Bal. 


The  extra  column  marked  "Collections"  is  used  by 
the  bookkeeper  for  the  purpose  of  noting  what  steps  have 
been  taken  in  the  collection  schedule,  as  follows : 


When  first  statement  goes  out,  he  writes  in  pencil... .  S.  2/15/10 

Second  statement 2  S.  2/28/10 

First  letter L.  3/10/10 

Second  letter  advising  that  draft  will  be  drawn T.  D.  4/5/10 

When  draft  is  drawn D.  4/15/10 

If  account  is  given  to  an  attorney Att.  5/15/10 

Thus  when  the  account  is  looked  ov^er  it  not  only 
shows  the  debits  and  credits,  but  also  what  steps  it  has 
been  necessary  to  take  in  order  to  make  collections. 

Where  the  salesmen  attend  to  collections  on  their 
trips,  statements  of  all  open  accounts  are  gone  over  by 
the  salesman  and  office  manager,  and  written  into  this 
form  of  ruled  book. 


APPENDIX 
SALESMEN'S  TRIP  BOOK 


241 


Customers'  [ 
Names 


Location 


Date  of  trip 


Amt.  of 
Account 


Paid 


Remarks 


Date  of  trip 


Amt.  of 
Account 


Paid 


Remarks 


The  accounts  are  talked  over  and  instructions  given 
to  the  salesman  for  those  doubtful  and  overdue.  As 
remittances  come  in  from  the  salesmen  while  on  the  trip, 
they  are  credited  in  this  book  (this  has  nothing  to  do  with 
the  crediting  of  these  same  accounts  in  the  ledger)  and, 
upon  the  return  of  the  salesman,  he  and  the  office  man- 
ager go  over  the  accounts  covered  together;  and  upon 
the  salesman's  report,  the  office  manager  takes  such  action 
on  bad  accounts  as  seems  to  be  warranted. 

In  addition  to  the  above  scheduled  steps  and  forms,  a 
few  aids  to  collection  service  are  here  shown. 

Upon  the  receipt  of  a  remittance  from  an  account, 
leaving  a  balance  still  overdue,  the  following  is  stamped 
upon  the  letter  containing  the  remittance: 


The   balance   of   this   account 

is  $ ,  of  which  $ is 

over  four  months. 


Stamped  on  statements — 


This  account  is  overdue.  If 
the  same  is  not  paid  within  ten 
days  from  date,  we  will  draw 
on  you  for  the  same. 


242 


THE  ART   OF  COLLECTING 


In  order  to  keep  the  collection  manager  in  constant 
touch  with  the  various  details  influencing  accounts,  the 
following  monthly  list  of  customers  who  have  made 
complaints  for  shortages  or  overcharges  is  useful,  for  the 
reason  that  it  very  often  shows  up  the  chronic  kickers. 

MONTHLY  ACCOUNTS  OF  ALLOWANCES  AND  RETURNS 


c 

(J 

o 

Returned  goods 

Claims 

Custom- 
ers' 
names 

en     1) 

O     1- 
O     3 

Date  of 
original 
shipment 

Reasons 

for 
returning 

=  1 

C     <u 

o  -s 

c 

o 
E 

< 

3     rt 

When  the  trial  balance  Is  drawn  off  monthly  the  book- 
keeper should  list  all  overdue  accounts  on  the  following 
form: 

BOOKKEEPER'S  MONTHLY  LIST  OF  OVERDUE 
ACCOUNTS  TAKEN  FROM  TRIAL  BALANCE 
Month  ending 


Customer's  name    Location   Amt.  of  account   Amt.  past  due    Remarks 


This  serves  to  keep  the  office  manager  well  posted  on 
the  bad  accounts,  and  Is  a  constant  reminder  to  keep  after 
them.     Doubtful  accounts  are  usually  given  a  credit  limit. 


APPENDIX  243 

Whenever  the  account  approaches  this  amount,  the  fol- 
lowing form  of  card  is  filled  out  by  the  bookkeeper: 

LIMITED  ACCOUNT  CARD 


Account  limited  to  $250. 
Name — Wm.  Weber. 
Location — Millstown,  Pa. 
Ratings — Fair. 
Reports — Fair. 

Total  due  on  accounts 

Amount  overdue 

Bought  last  6  months 

Paid  last  6  months 

Date  last  payment — 1/26/10. 
Date — 2/16-10. 


$246.19  I 
86.24  ' 
497.18 
64.20 


This  notification  serves  a  twofold  purpose,  for  when 
the  account  seems  to  be  going  behind  it  causes  the  man- 
ager to  start  a  vigorous  collection  campaign  to  get  it  into 
shape,  and  also  it  warns  him  to  either  raise  or  lower  the 
credit  limitation  according  to  the  manner  in  which  the 
account  has  worked  out  since  the  opening  date. 

Handling  collections  successfully  calls  for  harmonious 
and  Intelligent  combination  between  the  oflice  manager 
and  the  accounting  department,  and  the  mechanical  steps 
and  forms  here  shown  are  designed  fully  to  cover  the 
work.  The  question  of  forcing  collections,  however,  is 
one  that  must  be  answered  by  the  person  in  charge  ac- 
cording to  the  meat  of  the  account,  an  intelligent  reading 
of  the  debits  and  credits  of  the  ledger  page  being  an 
absolute  necessity. 


Collections  and  How  to  Handle  Them 

(Article  IV) 

By  Joel  B.  Thompson,  of  Janeway  &  Carpenter, 
Chicago,  111. 

The  collection  department  of  a  mercantile  business 
should  be  under  the  exclusive  supervision  and  control  of 
the  credit  manager.  In  these  days  of  Intense  competition 
there  Is  no  department  of  the  establishment  where  a  blun- 
der may  prove  more  costly.  A  credit  manager  can  no 
more  make  an  error  In  his  own,  or  in  the  collection  de- 
partment, than  a  train  dispatcher.  He  cannot  begin 
over  again  like  an  artist  or  a  writer,  but  Is  required  to  do 
perfect  work  every  time.  Therefore,  only  a  simple,  prac- 
tical, elastic,  everyday  system  that  produces  results  can 

be  used. 

*  *  *  *  *  * 

The  writer  submits  a  plan  of  collecting  evolved  from 
his  experience  of  over  twenty-five  years,  adaptable  to  any 
mercantile  business,  small  or  large,  and  exhibits  in  Form 
"A"  a  specially  ruled  ledger  page,  by  the  use  of  which 
the  time  of  both  accountant  and  credit  man  may  be 
economized. 

This  form  of  ruling  enables  a  credit  man  actually  to 
see,  pictured  on  the  ledger  page,  a  complete  history  or 
synopsis  of  the  manner  in  which  an  account  has  been 

244 


APPENDIX  245 

treated,  as  the  blank  space  at  the  right  of  the  account 
exhibits  fully  all  work  done  in  effecting  settlements  of 
due,  or  overdue,  amounts.  All  questions  are  also  settled 
at  once  (without  consulting  collection  cards  or  copies  of 
statements  or  letter  impression  copybooks),  as  to  just 
when,  and  for  what  amounts,  statements  were  sent,  notes 
mailed  for  signature,  drafts  made,  extensions  requested, 
rebates  (of  any  nature)  claimed,  what  bank  a  customer 
uses,  highest  credit  at  any  one  time,  latest  commercial 
rating,  principal  orders  secured  by  salesman,  and  date 
when,  or  any  special  information  from  salesman,  com- 
mercial agencies,  or  others,  thus  becoming  a  veritable 
guideboard  for  a  credit  man,  enabling  him  thoroughly  to 
utilize  the  labor,  methods  and  knowledge  the  accountant 
and  collection  clerk  have  displayed  and  recorded,  and 
hence  greatly  facilitating  the  formation  of  correct  con- 
clusions relating  to  credits. 

By  the  side  of  his  open  debtor's  ledger,  the  collection 
clerk  uses  Form  "B,"  a  specially  ruled  "collection  tickler," 
eminently  satisfactory  where  there  are  a  large  number  of 
accounts,  and  a  perfect  substitute  for  theoretical  card 
forms.  To  prepare  Form  "B"  for  use,  begin  at  page  one 
of  any  debtor's  ledger,  examine  the  first  open  account, 
and  if  one  of  a  group  of  invoices  will  mature  within  the 
time  limit  of  the  record  (generally  thirty  to  forty-five 
days),  or  is  past  due,  a  record  is  made  of  folio,  initial  of 
account,  and  date  when  any  action  is  necessary,  under 
one  of  these  headings — "Statement,"  "Write,"  "Draft." 
■^  Each  consecutive  ledger  page  is  examined  and  a  record 
made  on  "collection  tickler"  under  Its  proper  heading.  In 
case  any  invoice,  or  group  of  invoices.  Is  due.  Going 
through  the  debtor's  ledger  monthly  in  this  manner  takes 


246  THE  ART  OF  COLLECTING 

but  a  short  time,  and  where  several  debtors'  ledgers  are 
in  use,  let  several  days  elapse  between  dates  of  preparing 
the  "ticklers."  Then  daily,  semi-weekly,  or  weekly,  as  con- 
venient, all  due  accounts  can  be  dunned,  it  being  necessary 
only  to  open  the  "tickler,"  refer  to  the  indicated  ledger 
page  and  do  what  is  necessary,  making  a  record  on  the 
ledger,  and  placing  a  date  ahead  on  the  "tickler"  when 
further  action  will  be  needed,  if  within  the  "tickler"  runs. 
If  not,  the  next  month,  when  preparing  your  "tickler" 
period,  the  record  on  the  ledger  page  ("memoranda 
column")  will  indicate  what  further  action  is  necessary 
and  when.  A  dunning  record  is  thus  continually  growing 
on  the  ledger  page  which  in  time  becomes  very  valu- 
able, for  by  it  the  financial  position  of  any  customer  can 
be  read  at  a  glance,  and  generally  It  can  be  predicted 
from  the  past  record  what  can  be  expected  in  the  future, 
also  the  dates  when  customers  will  usually  settle,  or  when 
extensions  will  probably  be  requested,  etc. 

Explanation  of  Form  "A" — Roe  and  Doe  having 
failed  to  protect  their  note  due  February  i,  1908,  it  is 
a  second  time,  on  February  15,  1908,  sent  direct  to  their 
bank,  with  a  request  to  collect  in  instalments,  If  necessary, 
and  on  March  4th,  both  debtors  and  bank  are  written. — 
On  March  12,  1908,  an  extension  of  four  to  six 
months  is  requested,  and  note  recalled,  and  returned 
by  bank. — May  28,  1908,  a  statement  Is  mailed,  and  a 
draft  made  for  $30  at  10  days'  sight,  which  is  paid  June 
15,  1908. — July  10,  1908,  a  statement  is  mailed  for 
$78.12,  and  a  draft  made  at  10  days'  sight  for  $30  on 
account. — This  Item  Is  returned  unpaid  July  18,  1908, 
endorsed,  "No  attention,"  etc. — July  24,  1908,  a  draft  is 
made  for  $30  at  5  days'  sight,  which  is  paid  July  31, 


APPENDIX 


247 


1908. — August  31,  1908,  statement  is  mailed,  as  re- 
quested, for  balance  due  with  interest,  and  draft,  with 
note  attached,  is  made,  which  is  paid  September  14, 
1908. 

The  salesman  receives  a  carbon  copy  of  all  letters 
mailed  to  his  customers,  relating  to  credits  or  collections. 


Form  "  A." 


r. 

V 

i. 

ROE 

AND 

DOE  ( 

8aleBman\ 
Phelps  ) 

Coleman.  Texas 

Date 

Posting 
Folio 

DR. 

CB. 

DR. 

Balance 

c«. 
Balance 

MBMOKANDA. 

1908 

As 

P8 

COLBUAN 
NAT.  BIT. 

Aug. 

I 

/ 

Oi:t.i-4M 

6ia 

V 

108 

13 

108 

12 

2-1  509— Wt.     & 

No.     IOJ95    to 

Bk.  to  collect 

in  payments. 

RtcalUdj.i6  09 

Ret.         3-2}^ 

7-2goS-PAelps. 

itoj.oo  as  10  1 

— 4  m. 

Dec. 

*7 

BIR  ^0. 

X> 

loS 

12 

3.4.09— Wt.    R. 
&D.  Atnr.  BV. 
3~i2—Ask  Ex. 
tension   4    to 
6m.  Nothing- 
doing  till 
gr^n  crop  is 
sold 

1909 
Feb. 

'J 

V 

BIR  No. 
i02gsalt 

2#7 

V 

108 

,2 

toS 

/2 

5-28— St.  108.13 
&  Dft.   10  da 
$30.00. 
Paid  6-15. 

June 

15 

Cash  Pd 
Draft . . . 

141 

30 

00 

78 

12 

7-10— St    78  13 
&  DfL  10  da. 
S3000. 

Returned  J-iS 
No   attention. 

July 
Sapt. 

3> 

Tolnl./l. 

163 

"79 

V 

V 

1 

6j 

30 

49 

00 

75 

48 

13 

1 

63 

7-24— St.  &  Dft. 
&    Note  — As 
requested. 
49.75lIot.  1.6^) 
('aid  9  14. 

Italics  for  red  ink  it«ms. 


Form  "B." 


r      ■! 

Ledgm  "N  "        P-3 
Mak.-i  to  Ap«.-t-'o9 

Statemwit 

Weot 

DaAFT 

1088 

R.&D.              ex. 

Left  hand  page 

Right  band  page  Is  similarly  ruled 

A 

Filing  of  Collection  Items 
By  C  W.  Hughes,  St  Louis,  Mo. 

Of  late  years  cards,  or  more  properly  speaking,  die 
card  system,  has  become  almost  indispensable  in  the  well 
regulated  and  up-to-date  office.  Cards  have  invaded  every 
department.  Their  uses  and  methods  of  employment  are 
too  manifold  to  attempt  to  describe,  but  I  want  to  show 
how  they  can  be  successfully  employed  in  the  collection 
department  in  conjunction  with  the  credit  department. 

I  know  from  experience  that  a  long  involved  paper 
in  explanation  of  a  system  is  very  confusing — in  fact,  the 
beginning  is  forgotten  before  the  end  is  reached — and  so 
I  will  endeavor  to  explain  the  system  under  which  I  keep 
track  of  collections  in  as  few  words  as  possible. 

We  will  take  up  the  matter  from  the  receipt  of  the 
shipping  ticket  and  order  from  the  factory,  from  which 
point  the  system  practically  begins. 

First  the  order  goes  to  the  entry  clerk,  who,  when 
he  has  entered  it  in  the  sales  book,  makes  out  cards  in 
duplicate,  on  one  of  which  is  the  word  "Cash."  This 
card  is  sent  to  the  collection  department.  On  the  other 
is  printed  the  word  "Ledger,"  which  goes  to  the  cashier, 
who  files  it  in  a  drawer  marked  "Ledger."  These  cards 
are  blocked  alternately,  "Cash"  and  "Ledger,"  so  that 
by  using  a  carbon  sheet  but  one  writing  is  necessary.  On 
the  ledger  card  are  lines  for  the  customer's  name  and 

24S 


APPENDIX  249 

address,  these  lines  being  on  the  right-hand  side  of  the 
card.  On  the  left-hand  side  are  lines  for  the  due  date 
of  invoice,  date  of  invoice,  terms  and  amount  Under- 
neath the  address,  and  arranged  in  statement  form,  arc 
the  words: 

Cash, 

Discount, 

Freight, 

Miscellaneous  allowances, 

the  total  of  which  should  agree  with  the  amount  of  the 
invoice.  When  remittance  is  received  these  various  items 
are  entered  upon  the  card,  which  is  given  to  the  posting 
clerk  to  enter  in  the  ledger,  as  we  do  not  post  direct  from 
the  cash  book,  only  the  daily  total  of  postings  being  com- 
pared and  the  card  retained  by  the  posting  clerk  for 
future  reference  if  necessary. 

The  "cash"  card  is  the  same  as  the  "ledger"  card 
only  as  far  as  the  headlines  are  concerned — that  is,  name, 
address,  memorandum  of  invoices  and  amount,  which 
items  take  up  about  one-quarter  of  the  card.  Underneath 
this  heading  on  the  "cash"  card  is  a  line  reading  "State- 
ment Sent."  The  balance  of  the  ticket  has  lines  for  re- 
marks— the  first  of  these  lines  marked  "Letters,"  the  last 
one  "Drafts."  These  cards  are  filed  in  a  cabinet  drawer 
under  their  due  date,  and  if  the  account  is  paid  (because 
of  discount)  before  it  comes  due,  the  card  is  taken  out 
and  destroyed  by  the  cashier.  The  cards  are  easily  found 
on  account  of  the  due  date  having  been  placed  on  the 
ledger  cards  as  previously  mentioned. 


250 


THE  ART  OF  COLLECTING 


Due 

Date Terms. 


Remarks 


Statement  sent. 
Letters 


Draft. 


Due 

Date Terms. 


Remarks 


Paid 


Balance. 


Cash 

Discount. 
Freight. . 
Shortage. 


Total. 


The  due  date  file  is  referred  to  every  day  or  so,  and 
statements  sent  out  from  the  cards  two  or  three  days 
before  the  accounts  become  due,  the  date  of  sending  the 
statement  being  placed  upon  the  line  marked  "Statement 
Sent."  This  card  is  then  transferred  to  another  drawer 
marked  "Past  Due  Accounts,"  this  drawer  being  arranged 
alphabetically. 

Before  statements  are  sent  out  these  cards  are  always 
compared  with  the  ledger  to  see  if  the  account  has  been 
paid,  or  to  make  sure  that  through  some  oversight  the 
card  was  not  removed  from  the  file.  This  system  keeps 
the  "Past  Due"  and  "Not  Due"  accounts  in  their  sep- 
arate compartments. 


APPENDIX  251 

As  we  do  not  send  out  statements  on  the  first  of  the 
month,  but  only  as  the  accounts  become  due,  I  place  cer- 
tain signs  or  figures  after  each  item  in  the  ledger  when 
statements  are  sent,  customers  written  to,  or  drafts  drawn. 
By  this  means  I  can  tell  at  a  glance  by  referring  to  the 
ledger  how  the  customer  pays  his  account,  whether  dis- 
counting, paying  on  receipt  of  statement,  or  draft,  or  if 
draft  is  returned  unpaid,  etc. 

Should  an  invoice  become  due  before  a  previous  one 
has  been  paid,  the  word  "Over"  is  stamped  upon  the  face 
of  the  card,  and  the  past  due  invoice  transferred  to  the 
back  of  the  card,  under  which  is  placed  the  date  and 
amount  of  the  invoice  just  coming  due;  and  a  statement  is 
sent  for  the  past  due  and  maturing  invoices. 

By  the  signs  and  figures  on  the  ledger  you  can 
determine  if  the  statement  has  been  sent,  and  therefore 
find  the  card  in  the  "Past  Due"  drawer.  I  have  no  certain 
hours  or  time  to  go  through  this  "Past  Due"  drawer,  but 
at  every  opportunity  run  over  as  many  accounts  as  pos- 
sible, using  a  shifting  card  to  designate  the  point  where 
I  was  compelled  to  stop  and  commencing  there  at  the 
next  opportunity. 

Before  writing  regarding  past  due  accounts,  the 
ledger  is  always  referred  to,  for  two  reasons — first,  to 
make  certain  that  the  account  has  not  been  paid,  and  the 
card  overlooked,  and  second,  in  order  that  I  may  keep 
closely  In  touch  with  my  accounts.  This  Is  especially 
necessary  in  our  business,  because  we  ship  from  St.  Louis, 
as  also  from  several  eastern  plants,  billing  from  each. 

When  going  through  the  cards  In  the  "Past  Due" 
drawer,  accounts  are  found  In  which  no  attention  has 
been  paid  to  statements  or  letters.    They  are  either  drawn 


252  THE  ART  OF  COLLECTING 

upon,  or  a  letter  written  stating  that  draft  will  be  made 
on  a  certain  date  if  remittance  is  not  received  prior  to 
that  date — the  date  of  the  letter  and  date  on  which  draft 
is  to  be  made  being  placed  on  the  line  marked  "Letter," 
and  the  name  of  the  customer  placed  on  a  calendar  pad 
(I  use  this  in  preference  to  a  tickler  as  I  find  it  more  con- 
venient). The  card  is  then  returned  to  the  "Past  Due" 
drawer. 

When  the  date  mentioned  has  arrived  and  the  account 
has  not  been  paid,  a  draft  is  drawn,  and  the  name  of  the 
bank,  with  the  date,  entered  on  the  line  marked  "Draft." 
This  card  is  then  transferred  to  a  drawer  marked 
"Drafts,"  to  await  either  check  or  return  of  the  draft  un- 
paid, as  we  have  printed  instructions  to  the  bank  on  a 
perforated  slip  attached  to  the  draft,  for  the  bank  to  hold 
a  few  days  if  prospects  for  collection  are  good.  A  reason- 
able length  of  time  is  allowed,  and  if  nothing  is  heard 
regarding  the  draft,  the  matter  is  taken  up  with  the  bank. 
This  occurs  very  rarely,  and  is  only  occasioned  by  the 
draft  being  mislaid  by  the  bank  or  miscarried  in  the  mail. 

Our  system  has  been  found  very  satisfactory,  as  it 
keeps  us  continually  in  touch  with  the  past  due  accounts. 
It  is  rapidly  worked,  and  in  fact  the  explanation  of  the 
system  is  the  most  intricate  part  of  it 


The  Credit  Man's  Standard  of  Efficiency 

By  E.  W.  Storey,  in  the  Philadelphia  Creditman 
(In  part) 

The  credit  man  should  be  a  student  In  his  line  of 
business — be  it  what  it  may — who  studies  the  relation  of 
the  profit  to  be  earned  to  the  risk  taken.  Wise  business 
men  have  been  known,  because  of  the  profitable  character 
of  a  certain  line  of  goods,  to  take  long  chances  on  the 
credit  end,  and  have  thus  made  money.  On  the  other 
hand,  the  wise  business  man  who  knows  that  his  margin 
of  profit  is  so  slim  that  his  turnover  must  occur  at  least 
every  ninety  days,  does  not  take  on  credit  accounts  when 
he  knows  he  cannot  get  his  pay  in  five  or  six  months,  even 
if  the  prospective  customer  is,  as  the  old  familiar  saying 
goes,  "good  as  wheat."  And  now  we  have  just  reached 
the  real  essence  of  the  subject,  namely,  the  consideration 
of  terms  vs.  credit  responsibility;  and  it  is  a  subject  that 
is  shamefully  neglected,  as  evidenced  by  the  practice  of 
rendering  credit  accounts  once  a  month  instead  of  render- 
ing the  separate  bills  as  they  fall  due. 

No  credit  man  can  claim  the  highest  degree  of  effi- 
ciency until  he  collects  his  bills  as  soon  as  they  are  due 
(with  reasonable  allowance  for  meritorious  extension) 
and  as  much  sooner  as  possible,  consistent  with  the  pres- 
ervation of  profits,  by  which  is  meant  avoiding  the  allow- 
ance of  excessive  discounts  to  encourage  payments  be- 
fore bills  are  due. 

253 


254  THE  ART  OF  COLLECTING 

How  can  any  credit  man  defend  the  time-honored 
practice  of  monthly  rendering  as  compared  with  the  more 
modern  method  of  rendering  bills  as  they  fall  due?  The 
following  is  a  simple  illustration  of  the  loss  sustained  by 
the  use  of  the  monthly  rendering:  A  bill  of  goods  is 
shipped  and  invoiced,  say,  on  the  second  day  of  the  month, 
terms  sixty  days.  Now  that  bill  will  be  rendered  twice 
by  those  who  render  everything  due  and  not  due,  before 
it  is  actually  due;  while  by  those  who  render  once  a  month 
bills  only  which  are  due,  it  will  not  be  rendered  at  all 
until  twenty-eight  days  after  it  is  actually  due. 

To  make  our  case  strong,  let  us  presume  that  we  are 
considering  gilt-edged  credits  only.  If  we  prove  our  case 
right  in  regard  to  these  accounts  it  will  be  doubly  right 
in  regard  to  weak  or  doubtful  risks. 

Right  here,  undoubtedly,  someone  rises  to  repeat  those 
old  stereotyped  remarks  that  come  chiefly  from  a  lack  of 
investigation  and  therefore  from  a  lack  of  knowledge : 

"My  customers  require  a  complete  statement  month- 
ly." Perhaps  he  adds  that  the  average  country  dealer 
does  not  keep  his  books  written  up  and  needs  a  monthly 
statement  to  keep  him  straight;  or,  "My  customers  make 
it  a  rule  to  discount  all  the  bills  of  one  month  on  the 
tenth  day  of  the  following  month.  A  commendable  and 
quite  common  practice  that  requires  a  regular  monthly 
statement." 

To  the  first  objection  we  would  answ^er  that  it  is  a 
bad  rule  to  encourage  a  dealer  in  slouchy  methods;  that 
we  shall  rather  educate  him  to  keep  his  books  written  up 
regularly;  and  if  our  attitude  toward  him  is  such  as  to 
require  him  to  provide  the  necessary  funds  to  meet  a 
bill  the  day  it  falls  due,  or  with  five  or  ten  days'  grace 


APPENDIX  255 

as  a  limit  in  all  ordinary  cases,  it  is  commendable,  to  say 
the  least. 

To  the  other  we  would  say  that  only  a  very  small 
percentage  of  dealers  discount  all  the  bills  of  a  previous 
month  on  the  tenth  or  fifteenth  of  the  following  month, 
and  that  it  is  a  bad  rule  to  adopt  or  maintain  a  method 
that  is  beneficial  only  to  a  small  minority  of  customers. 

Why  should  a  good  credit  customer  help  himself  to 
twenty,  forty  or  sixty  days'  extra  time  on  a  bill  after  it 
is  due,  any  more  than  he  should  help  himself  to  the  cash 
in  your  till  ?  It  all  amounts  to  the  same  thing  in  the  end. 
The  wise  merchant  keeps  his  capital  working  and  does 
not  tie  it  up  even  in  good  credit  risks. 

Credit  is  purely  an  accommodation,  and  when  it  is 
abused  a  polite  note  is  in  no  way  improper;  and  experi- 
ence has  shown  that  a  gentle  reminder  at  the  right  time 
is  an  excellent  tonic  for  the  chronic  slow  payer  who  is 
prone  to  let  his  accounts  run  unnecessarily  long  through 
outright  slouchiness  in  business  methods,  or  with  the  de- 
liberate intent  of  using  another's  capital  with  which  to 
do  his  own  business. 

How  many  wealthy  manufacturers  are  actually  acting 
as  bankers  at  6  per  cent,  for  customers  using  capital  that 
should  earn  the  rightful  owners  10,  12  or  15  per  cent, 
in  active  circulation?  Credit  men  as  a  whole  should  lend 
their  support  to  a  concentrated  effort  to  get  the  money  on 
bills  when  they  fall  due,  but  should  not  encourage  the 
regular  closing  of  accounts  with  thirty  or  sixty-day  notes 
at  6  per  cent. ;  that  is  a  favor  to  be  granted  only  occa- 
sionally, and  when  circumstances  are  such  as  to  warrant 
It.  Neither  should  they  let  a  customer  habitually  get  from 
one  to  twenty-nine  days'  extra  time  when  he  does  not  seek 


256  THE  ART   OF   COLLECTING 

or  want  it.  Why  not  stop  the  little  but  myriad  drains  on 
profits  by  introducing  the  very  best  method  of  bringing 
in  money,  intact,  at  the  earliest  possible  moment? 

Again,  someone  may  rise  to  say  that  the  daily  render- 
ing of  bills  involves  a  complicated  accounting  system  and 
a  lot  of  inside  red  tape.  That  is  not  true.  In  fact,  it  is 
a  method  that  should  simplify  inside  methods  and  reduce 
the  so-called  red  tape.  Credit  department  methods  are 
a  subject  worthy  of  careful  study,  just  as  factory  methods, 
sales  methods  and  accounting  methods  are  made  the  sub- 
ject of  careful  study  by  the  up-to-the-minute  merchant. 

You  cannot  hope  to  attach  up-to-date  credit  depart- 
ment methods  to  an  antiquated  accounting  system  any 
more  than  the  merest  tyro  would  expect  to  get  six-horse- 
power from  a  two-horse-power  engine. 

We  here  outline  briefly  the  requisites  of  an  accounting 
system  that  will  permit  the  daily  rendering  of  bills  as  they 
fall  due,  and  the  easy  following  up  that  should  accompany 
such  a  system : 

Loose-leaf  sales  ledgers  alphabetically  filed; 

Loose-leaf  day-books  similarly  filed; 

Posting  direct  from  day-book  to  ledger; 

Draft  records  on  ledger  page; 

Daily  drafts  concurrent  with  daily  statements; 

Perfect  co-operation  between  credit  man  and  ac- 
countants. 

That  is  all.  The  rest  is  merely  a  matter  of  minor 
details,  such  as  following  up  drafts,  not  making  drafts 
where  same  are  objectionable,  but  writing  a  polite  note 
instead  to  accompany  the  statement,  and  the  utter  aban- 
donment of  rubber-stamp  dunning  or  sticker  or  circular- 
letter  dunning,  which  cannot  be  too  strongly  condemned. 


APPENDIX  257 

A  tickler  date  should  be  maintained  on  all  delinquent 
accounts,  to  arrest  new  orders,  and  enable  the  credit  man 
to  connect  up  the  new  order  with  the  delinquency  and  use 
it  as  his  judgment  deems  best. 

A  maturity  record  should  not  be  a  set  of  cards  or 
envelopes,  but  merely  a  loose-leaf  book  with  a  page  or 
number  of  pages  for  each  day's  business,  according  to 
volume.  The  elimination  of  folios  and  addresses  makes 
the  writing  up  simple.  The  combining  of  bills  falling 
due  in  a  period  of  five  or  even  ten  days  reduces  labor,  and 
prevents  too  frequent  communication  with  the  customer. 

Every  business  has  its  peculiarities ;  and  a  daily  render- 
ing system  must  be  fitted  to  the  needs  of  the  business;  but 
the  principle  here  given  is  the  right  one  and  should  re- 
ceive the  thoughtful  and  careful  consideration  of  every 
credit  man  who  wishes  to  attain  to  the  highest  degree  of 
efficiency. 

Finally,  we  may  say  that  in  the  last  analysis  the  credit 
man's  work  should  be  properly  judged  by  the  net  results 
in  profits,  and  the  nature  of  the  accounts  lost;  and  that 
as  a  going  proposition  it  should  be  his  constant  aim  to 
turn  over  the  capital  invested  as  often  as  possible,  with- 
out resorting  to  demoralizing  methods,  such  as  excessive 
discount  or  allowances,  to  bring  in  the  money  early. 

Some  "Personal  AppesJ"  Letters 

Dear  Sir: 

Small  bills,  however  trifling,  when  considered  singly, 
in  the  aggregate  form  a  sum  so  large  that  the  withholding 
has  ruined  an  otherwise  prosperous  business.    Happy  is  he 
who  will  cheerfully  perform  the  duty  of  the  mom.ent,  what- 
ever it  may  be. 
The  above  fact  has  appeared  on  our  statements  for  many  years; 
occasionally,  however,  some  of  our  friends  overlook  that  plain  duty, 
the  doing  of  which  would  make  things  so  pleasant  for  us  all. 


258  THE  ART   OF   COLLECTING 

Have  you  ever  calculated  how  many  thousands  of  dollars  of 
accounts  a  single  ten-dollar  bill  will  pay,  if  "sent  on  its  way 
rejoicing"? 

We  find  you  are  overdue  to  us  for  an  account  of  $ ,  and 

if  you  will  kindly  read  over  the  motto  above  and  will  then  send  us 
your  check,  we  promise  to  "push  it  along,"  that  it  may  do  as  much 
good  to  the  other  fellow. 

Now,  one  good,  strong  pull;  pull  together! 
Yours  very  truly, 


Dear  Sir: 

It  was  David  Harum,  we  believe,  who  remarked  that  a  certain 
amount  of  fleas  is  good  for  a  dog  because  it  keeps  him  from  worry- 
ing over  being  a  dog. 

We  all  have  our  worries,  some  of  them  imaginary,  some  of  them 
real.  We  have  ours  and  you  doubtless  have  yours,  but  if  you  had  to 
run  a  shoe  factory  and  butt  up  against  some  of  our  pay-rolls  for 
leather  and  labor  at  this  season,  you'd  appreciate  the  fact  that 
financing  a  business  like  this  is  not  an  "unbroken  romance." 

Yours  very  truly, 


Dear  Sir: 

Do  you  remember  Job? 

He  said:  "All  my  appointed  time  will  I  wait,  until  my  change 
come." 

He  waited — and  his  change  came. 

Neither  Job,  nor  anyone  else,  past,  present  or  future,  can  outdo 
us  in  patience.  We  have  already  waited  our  appointed  time  for  your 
remittance  which  has  not  yet  come,  but  we  know  it  will,  and,  we 
trust,  soon. 

Now,  please  do  not  wait  to  see  what  our  next  letter  is  like. 
This  is  the  longest  letter  we  ever  wrote,  and  if  another  one  is  neces- 
sary, it  would  have  to  be  short  and  urgent,  as  we  are  very  busy  and 
need  the  money.  ^ 

Thsuiking  you  in  advance,  we  are 

Yours  very  truly, 


INDEX 


Account,  opening  an,  99,  100 

books  of,  200 
Accounts,  city,  70-79 

combining,  224 

corporation,  123-126 

instalment,  65,  66,  140,  141 

large,    129-139 

lawyers',  163  -165 

outside,  80-95 

petty,   102-104,   1 16-128 

physicians',  153-162 

professional,  153-165 

statement  of,  61 
Adjusting  claims,  19 
Advantages  of  close  collecting,  12 

13,  117,  118 
Agencies,  collection,  90,  207-211 

letters  to,  167,  168 
Agencies,  mercantile,  203-207 

information  from  24,  38,  39 

trade  and  local,  207 
American     Bankers'     Association 

statement   of,   26-28 
Attachment,  196 

Attorneys,  collection  problems  of, 
163-165 

employment  of,  90,   188-194 

letters  to,  168-170 

B 

Bad  pay  debtors,  46,  47 
Banks  as  collectors,  86,  87 

reports  from,  Z7 
Black  list,  the,  219,  220 
Branch  houses,  61 


City  accounts,  collection  of,  70-79 
Claims,  disputed,  90,  91 
Qassification  of  debtors,  42,  50,  51 
Close  collections,  12,  13,  117,  118 
Collecting  (See  also  Collection) 
Collecting    by    legal    proceedings, 
187-202 
letters,  114 


Collection  agencies,  90,  207-211 

letters  to,  167,  168 
Collection    attorneys    (See    attor- 
neys) 
card,  40,  41,  60,  64,  65,  185,  186, 

228-232,  243,  249-253 
information,  22-41,  184-186,  228- 

232,  234,  235,  239-247 
law,  187-202 
Collection    letters,   appearance   of, 
III 
for  instalment  accounts,  140-152 
for  large  accounts,  129-139 
for  petty  accounts,  1 16-128 
for  professional  accounts,  153-165 
general  requirements  of,  105-115 
miscellaneous,  166-175 
Collection  manager  and  his  work, 

11-21,  201,  202 
Collection  methods,  unusual,  212- 
226 
procedure,  83,  84 
rates  and  rules,  189,  190 
Collection  system,  the,  14,  52-60 
for  instalment  business,  62-69 
Collections    and    how    to    handle 
them   (Articles  I-IV)  227-248 
Collections,  express,  88 
instalment,  217 

keeping  in  touch  with,  172,  173 
personal,  176 
Collector  and  his  work,  176-186 

reports  of,  35,  36 
Commercial    agencies,    25,   38,   39, 

203-207 
Compromises  with  debtors,  48-50, 

TJ,  90,  91,  217,  218 
Conditional  sales,   14,  62,  63,   140, 

150-152 
Contracts,  instalment,  62,  63,   150, 
199 
with  collection  agencies,  210,  211 
Correspondents,  reports  of,  2)2> 
Credit  and  collection  information. 
22-41,  97-99,  227-253 
problems    of    the    small    dealer. 
96-104 
250 


a6o 


INDEX 


Credit,  applications  for,  25-33,  99. 

100 
associations,  98,  99 
card,  40 

extension  of,  97,  103,  254-258 
man's     standard     of     efficiency, 

254-258 
Men's  Association,  National,  28, 

29,  39 

reports,  25-41 

threats,  219 
Credits,  professional,  153 
Customers,  information  from,  39 

D 

Debtors,  a  study  of,  42-51 
classification  of,  42,  50,  51 
compromises  with  48-50,  T],  90, 

91,  217,  218 
delinquent.  78,  79,  202 
execution  proof,  48 

Defective    remittances,    1 73-175 

Direct  remittances,  170,  171 

Discounts  as  an  aid  to  collection, 
80-82 

Discounted  notes,  218,  219 

Disputed  claims,  90,  91 

Drafts,  84-89 
follow-up,  216,  217 
reports  on,  166,  167 

Duplicate  invoices,  55,  83 


Efficiency,  the  credit  man's  stand 

ard  of,  254-258 
Execution,  197 
Exemptions,  195,  196 
Express  collections,  88 
Extension  of  credit,  97,   103,  254- 

258 
time,  44,  67 


Farmers  as  credit  risks,  39 
Fee,  attorneys',  189,  190 
File  for  duplicate  invoices,  56 
Filing  collection  items.  249-253 
information,  40,  41.  228-253 
Final  notice  before  suit,  139 
"Flv-by-night"  customers.  93-95 
Follow-up  drafts,  87,  88.  216.  217 
Follow-up  for  attorneys,  193,  194 
Follow-up  letters,  74-76,  84 


Follow-up  procedure,  T^,  74 
Friends  of  debtor,  writing  to,  221- 
223 


Garnishment,  196,  224,  225 

H 

Honesty  of  collectors,  177 

I 

Illustrative  collection   letters    (see 

Letters) 
Imprisonment  for  debt,  198.  199 
Instalment  accounts,  62-69,  140-152 

payments,  "]"],  78 
Interest  on  accounts,  82,  83 
Investigations,   credit,    24-40,   254- 
258 

J 

Judgments,   196,   197 

turning  accounts  into,  220,  221 

K 

Keeping  in  touch  with  delinquents, 
78,  79 
collections,  172,  173 


Large  accounts,  collecting,  129-139 

Law,  collection,  187-202 
knowledge  of,  19 
of  exemption,  195,  196 
of  libel,  114 

Legal  phases  of  collecting,  187-202 

Letters,  collection,  for  corporation 
accounts,  123-126 
for  good  customers,  1 18-120 
for  instalment  accounts,  140-152 
for  larger  accounts,  129-139 
for  outside  accounts.  80-95 
for  petty  accounts,  11 6- 128 
for    professional    accounts,    153- 

165 
general  requirements  of,  105-115 
insistent.  121-123 
miscellaneous,  166-175 
personal  appeal,  258,  259 
registered,  214,  215 

Letters  to  attorneys,  168-170 
collection  agencies.  167,  168 

Libelous  statements,  114 


INDEX 


261 


M 

Mercantile   agencies,   25,  203-209 
Merchants'  associations,  38 
Monthly  statements,  70,  228,  254- 
257 

N 

National    Ass'n    of    Credit    Men, 

statement  of,  28,  29 
Neglecting  accounts,  42,  loi,  102 
Non-forfeitable  contracts,  150-152 

O 

Opening  an  account,  99,  100 
Outside  accounts,  80-95 


Pay-day,  importance  of,  67 

of  special  customers,  72 
Personal  appeal  letters,  258,  259 

collections,  176 

interview,  76,  'J^ 

investigations,  24 
Petty  accounts,  96-104 

letters  for,  116-128 
Physicians'  accounts,  153-162 
Postal  cards,  use  of  in  collections 

113.  "4 
Prepayment  of  accounts,  82 
Professional  accounts,  153-165 

R 

Recording  information,  40,  41,  228- 

254 
Registered  letters,  76,  214,  215 
Remittances,  cash,  93 

defective,  173-175 

direct,  170,  171 
Replevin,  196 
Reports,  collector's  daily,  185,  186 

credit,  25-41,  205,  206 
Reports  on  drafts  deposited,   166, 

167 
Retail  accounts,  96-104 


Sales,  conditional,   14,  (i2,  63,   150, 

199 
Sales  and  collections,  loi,  102 
Salesmen  as  collectors,  8g 
reports  of,  34,  35 


Selection    of   collection    attorneys. 

191,  192 
Slow  pay  debtors,  43-46 
Small  accounts,  collecting,  102-104 

letters  for.  1 16-128 
Small  dealer,  problems  of,  96-104 
Special    collection    methods     (see 
"Unusual  collection  methods") 
Standard      of      efficiency,      credit 

man's,  254-258 
Statement,  endorsed,  126-128 
of  accounts,  61,  71-73,  228,  238 
of  customer's  receipts,  92 
Statements,  credit,  25-33 
of  American  Bankers'  Ass'n,  27 

28 
of   Nat'l   Ass'n  of  Credit  Men, 

28,  29 
monthly,  70,  228,  254-257 
Statute  of  limitations,  195 
Suit  for  recovery,  196 

bringing,  194 
Supplementary    proceedings,    197, 
198,  225,  226 


Threats,  credit,  219 

Tickler,    collection,    59,    60    (also 

appendix) 
Training  collectors.  179,  180 
Turning  accounts  into  judgments, 

220,  221 

U 

Uncollectible  accounts,  48 
Unusual  collection   methods,   212- 
226 

Awkward  call,  223 

Black  list,  219 

Combining  accounts,  224 

Credit  threats,  219 

Discounted  notes,  218 

Follow-up  drafts,  216 

Garnishment    proceedings,    224, 
225 

Instalment  collections,  217 

Offer  of  concession.  217 

Registered  letter.  214 

Sending  out  the  boss.  220 

Supplementary  proceedings,  225 

Sweating  process,  224 

The  telegram.  215 

The  telephone  call,  213 

Turning     accounts     into     judg- 
ments, 220 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

Los  Angeles 

This  book  is  DUE  on  the  last  date  stamped  below. 


i?EC'D  LU-UKL 

1UG191968 


?Q 


mi 


mm 


a  TO  if  mi 


IQYI 


^.      AUG  15 


Form  L9-25hi-9,'47(A5618)444 


THE  LIBRARY 


UC  SOUTHERN  HtblUIMAL  Lionnn 


AA    001013  222    3 


i 


